EUROPEAN EQUITY OPEN: Stocks lower after the open ahead of final inflation metrics for April and a heavy slate of ECB speak

OVERNIGHT: On Wall Street, it was a risk off session on Tuesday, with the majority of stocks and indices in the red; the only pockets of strength were in Tech and large-cap names. US retail sales data was mixed while Industrial production and manufacturing output were above expectations; the Fedspeak was also heavy. Our US wrap can be accessed here. Overnight, Asia-Pac stocks were mixed with the region cautious after the weak handover from the US, where risk appetite was clouded amid debt ceiling concerns; a meeting between US President Biden and congressional leaders achieved no major breakthroughs (see below). On the data front, Japan emerged from recession in Q1, growing more quickly than analysts had anticipated. Our APAC wrap is here.

EUROPEAN OPEN: Stocks start the European day beneath the neutral line, with traders anxious about the looming US debt ceiling, where talks between President Biden and Congressional leaders did not yield any breakthroughs, despite a more constructive tone (see below). More domestically, final Eurozone inflation metrics will be published in the morning, which are expected to be unrevised; there is also a heavy dose of ECB speak on today’s docket (see Day Ahead, below).

STOCK SPECIFICS: In financials, UBS (UBSG SW) is set to win unconditional EU antitrust approval for the Credit Suisse (CSGN SW) takeover, Reuters reports. Separately, UBS said it sees mark-down of USD 9.9bln in fair value adjustments on financial assets related to the Credit Suisse deal. Blackstone (BX) and Thomson Reuters (TRI) are part of a consortium looking to sell GBP 2.4bln worth of stock in LSE (LSEG LN). Euronext (ENX FP) adjusted profits topped expectations, set to launch 'dark' trading by Q4. HSBC (HSBA LN) has reportedly abandoned plans for a UK pensions business. Higher interest rates helped Commerzbank (CBK GY) to double quarterly profits. Munich Re (MUV2 GY) profits slipped, hit by Turkey earthquake claims. Zurich Insurance (ZURN SW) gross premiums +6% in Q1 on higher prices. In tech, SAP (SAP GY) raised its outlook and announced a share buyback programme of EUR 5bln. Software AG (SOW GY) minority investor groups oppose Silver Lake's planned delisting of the company. In industrials, Siemens (SIE GY) Q2 sales topped expectations and it raised its outlook. In materials, Thyssenkrupp (TKA GY) incoming CEO warned that 'tough, far-reaching' decisions were needed. In communications, Ubisoft (UBI FP) posted a record operating loss in the year, but maintained guidance. In healthcare, Roche’s (ROG SW) BTK inhibitor fenebrutinib significantly reduced brain lesions in people with relapsing forms of multiple sclerosis. In consumer sectors, JD Sports Fashion (JD/ LN) said profits would top GBP 1bln this year. Watches of Switzerland (WOSG LN) enters FY24 significantly ahead of its long-term plans, it said. Our full equity specific briefings can be accessed here and here.

US DEBT CEILING: President Biden and Republican leaders expressed cautious optimism that a deal to raise the US debt ceiling was within reach, following talks at the White House on Tuesday, BBC reports. But House Speaker Kevin McCarthy said that the two sides remained far apart. But it appears that the threat of a default has been taken off the table; McCarthy was asked about the risk, and said "the great thing about that question is we've already taken default off the table." McCarthy added that a Biden-appointed representative would negotiate directly with his staff, which he said was a sign that the structure of how the sides negotiate has improved. Biden has also cut short his Asian visit, cancelling a visit to Australia and Papua New Guinea to focus on the debt limit standoff; Biden will however travel to Japan on Wednesday for the G7, and will return to the US on Sunday. Separately, over 140 leaders of the biggest US companies including Goldman Sachs (GS), Pfizer (PFE) and KKR (KKR), have urged the White House and congressional leaders to raise the debt ceiling and avoid a “potentially devastating scenario”, FT reports.

DAY AHEAD:

• Our full interactive day ahead calendar can be accessed here, a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Final Eurozone HICP metrics for April are expected to be unrevised. The ECB's Economic Bulletin covering monetary policy and housing investment will be released, ahead of its Publication of its supervision newsletter. The ECB speakers slate is busy, and includes Vice President de Guindos, de Cos, Elderson, Panetta. Riksbank's Floden will be speaking again, while from the UK, BoE Governor Bailey will address the Chambers of Commerce. On the supply front, UK will sell GBP 3.75bln of 2027 Gilts, while Germany will sell EUR 4.0bln of 2033 Bunds.


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  US DATA/SPEAKERS: Weekly MBA mortgage applications data, Building Permits and Housing Starts for April. On the supply front, the Treasury will auction USD 15bln of 20yr Bonds. Today’s corporate earnings docket includes TGT, TJX, CSCO, SNPS; our expectations sheet can be accessed here.


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  ENERGY: The DoE weekly energy inventory stats will be out in the US morning; afterhours on Tuesday, API data reportedly showed Crude +3.7mln (exp. -0.9mln), Gasoline -2.5mln (exp. -1.1mln), Distillate -0.9mln (exp. +0.1mln), Cushing +2.9mln.

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