EUROPEAN EQUITY OPEN: Stocks begin the week flat; more US debt ceiling talks later today, and a heavy amount of ECB-speak on tap

OVERNIGHT: On Wall Street, stocks and bonds into the weekend amid dovish remarks by Fed Chair Powell, who signalled an inclination to pause interest-rate increases in June, stating that policy tightening has come a long way, and the stance is restrictive. Powell also said that uncertainty remains about the effects of previous tightening and recent banking stresses. Treasury Secretary Yellen said further banking consolidation would likely be appropriate, weighing on regional banks. Progress in talks around the debt ceiling were tense, and over the weekend, President Biden and Republican House Speaker McCarthy had a positive phone call regarding the US debt ceiling, BBC reports; the two will meet on Monday for talks. Our US wrap is here. Overnight, APAC stocks were mostly positive but with price action rangebound amid cautiousness as the debt limit deadline draws closer. Aussie shares were subdued amid weakness in financials, though losses were contained amid the improving trade environment between Australia and its largest trading partner. China shares were up amid mixed commentary from the G7, where the Group said there was no legal basis for China’s expansive maritime claims in the South China Sea and that they oppose China’s militarisation activities in the region, although US President Biden expects relations with China to thaw soon. Furthermore, there were also frictions after China’s cyberspace regulator banned operators of critical information infrastructure in China from purchasing Micron Technology’s products following its review, while the PBoC provided no surprises and kept its benchmark lending rates unchanged with the 1-year LPR and 5-year LPR maintained at 3.65% and 4.30%, respectively. Our APAC wrap is here.

EUROPEAN OPEN: Stocks start the week in a subdued fashion, meandering around neutral after the open as continued global angst around the US debt ceiling persist as the deadline looms. President Biden will meet with House Speaker McCarthy for talks today. Traders are also contended with China taking action against semiconductor Micron (MU), which analysts framed as retaliation for Washington’s efforts to cut it off from the supply of high-end chips. The day ahead is thin for data releases, with only flash consumer confidence of note; there is a decent amount of ECB speak due, however (see Day Ahead, below).

STOCK SPECIFICS: In the consumer sectors,  Canada's industry minister said progress was being made on the battery plant deal with Stellantis (STLAM IM). Sainsbury's (SBRY LN) is said to be planning the release of a new online marketplace for high street fashion brands. TMR Capital is calling for an overhaul of Restaurant Group (RTN LN), proposes aggressive asset sales. Adidas (ADS GY) will begin selling its remaining inventory of Adidas Yeezy products, with funds being donated.  Henkel (HEN3 GY) CEO said it was mulling large acquisitions. AB InBev (ABI BB) receives a positive mention in Barron's citing cheap valuations. Chip names will note China’s regulatory review that found that US semiconductor producer Micron Technology’s (MU) products had serious network security problems. In industrials, Ryanair (RYA ID) saw profits rise to a near record in the year-ending March, and is cautiously optimistic that profits will be up in the next year amid robust summer demand conditions. Rolls-Royce (RR/ LN) CEO said the industrial company's core division had been "grossly mismanaged", though noted the business had a lot of potential. Maersk (MAERSKB DC) said it has seen return of pre-holiday demand levels in Asia; added that some vessels routing into the US East Coast via the Panama Canal have been impacted by low water levels, but it anticipates rainy season beginning in May to provide some relief. Holcim (HOLN SW) will deploy up to 1,000 electric trucks from Volvo (VOLVB SS) by 2030. In materials, US Forest Service told a Federal Court that it was unsure when it could approve a land swap allowing Rio Tinto (RIO) to develop the Resolution Copper mine in Arizona. CRH Plc (CRH LN) gets a positive mention in Barron's. For financials, Generali (G IM) will receive non-binding offers for its unit Tua Assicurazioni within four weeks. NatWest Group (NWG LN) has purchased GBP 1.26bln of its own shares from the UK government. UK property names will note house prices rose by 1.5% Y/Y in May (prev. 1.7%), according to Rightmove. In health care, Doctors discover reduced cardiac risk following a year of Novo Nordisk's (NOVOB DC) Wegovy diet medication, according to a study. Our full equity specific briefings for May 22nd can be accessed here and here.

DAY AHEAD: President Biden and House Speaker McCarthy will meet today for debt ceiling talks (see below). It is a thin day for scheduled data releases, with only the EU consumer confidence flash data for May due (a small improvement to -17.0 is seen from the prior -17.5). But we can expect further commentary from ECB officials, with chief economist Lane (Dove) and Holzmann (Hawk) set to speak at an Austrian Central Bank event (no text is expected); ECB VP de Guindos (Dovish) will speak on policy proposals to reduce the climate insurance protection gap, with no text expected and the subject matter suggesting that he will avoid monetary policy and economic outlook comments; ECB's Elderson (Neutral) will speak, but again, no text is expected, while we'll also get remarks from ECB's Vujcic (Neutral) and ECB's de Cos. . From the Fed, the hawkish Bullard (non-Voter) will speak on the US economy and monetary policy; with some differences emerging in the views of Fed officials with regards to the need for further near-term hikes, Bullard's comments will be key given he is seen as a leading hawk on the Committee. Meanwhile, Fed's Barkin (2024) and Bostic (2024) will give further remarks, though both have spoken a lot recently. Our full interactive day ahead calendar can be accessed here, a pdf version can be accessed here.

RECAP - DEBT CEILING: President Biden and Republican House Speaker McCarthy had a positive phone call regarding the US debt ceiling, BBC reports, and the two will meet on Monday for talks. Washington Post said Republican negotiators turned down a White House proposal to cap spending on defence and vital domestic programs in debt ceiling negotiations. A failure to raise the ceiling by June could lead to a default, causing financial market chaos and higher interest rates. Treasury Secretary Yellen again warned that the US was unlikely to have enough funds to meet its obligations by mid-June, emphasising the need for a debt limit agreement with Republicans. Politico notes that progressive lawmakers have urged Biden to bypass Congress to prevent a default by use of the 14th Amendment, though the White House remains resistant, with the President's advisers fearing such a move would trigger a legal battle, undermine global faith in US creditworthiness and damage the economy.

WEEK AHEAD: The week ahead has a few key items: On Tuesday, we will get a policy announcement from the BoK, flash PMI data, US Richmond Fed. On Wednesday, FOMC minutes, an RBNZ policy announcement, UK inflation data and Germany's Ifo Survey. On Thursday, policy announcements from the CBRT and the SARB, along with German GDP, GfK Consumer Sentiment, and a second look at US GDP in Q1. Friday sees the release of Tokyo CPI data in Japan, UK retail sales, US PCE and the final University of Michigan data for the month. Our week ahead briefing can be accessed here. There are a few key earnings we are also still looking out for; this week numbers are due from ZM on Monday; LOW, INTU, PANW on Tuesday; ADI, NVDA on Wednesday; and MDT, WDAY, COST on Thursday. Our Weekly US Earnings Estimates note can be accessed here.

22 May 2023 - 08:10- Research Sheet- Source: Newsquawk