EUROPEAN EQUITY OPEN: Stocks open higher across the board; Eurozone inflation data and ECB minutes ahead

OVERNIGHT: On Wall Street, stocks were lower after weak China official PMI data, while the Chicago PMI data was below expectations, and there was a surprise spike in JOLTS job openings, which continues to show labour market strength. The USD gained, supported by yield differentials. Nvidia (NVDA) closed lower amid profit taking into month-end, although the Nasdaq still closes the month +6%, while the SPX was flat in May. Our US wrap is here. APAC stocks rose after the US House voted in favour of suspending the debt limit, while Chinese Caixin manufacturing PMI data showed an improvement, in contrast to the official PMI data released earlier in the week, helping to lift Chinese shares. Aussie shares gained after strong capex data. Nikkei 225 was supported by robust business capex and profits. Our APAC wrap is here.

EUROPEAN INDICES: At 08:10BST, Euro Stoxx 50 +0.8% at 4,254; FTSE 100 +0.4% at 7,473; DAX +0.7% at 15,774; CAC 40 +0.8% at 7,155; IBEX 35 +0.9% at 9,135; FTSE MIB +1.1% at 26,334; SMI +0.6% at 11,289.

EUROPEAN CASH OPEN: The mood is constructive in Europe after the US House passed a debt ceiling measure, sending it to the Senate (see our recap, below), China Caixin manufacturing PMI data improved, in contrast to its official counterpart, while in Europe, German retail sales data also improved. It is a heavy data slate today in Europe, with the primary focus the inflation metrics for May, which are expected to show a cooling in line with national reports released this week (see below); final PMI data, ECB meeting minutes and the BoE DMP are also out today; there will also be key labour market releases in the US, which could have a macro reaction. Other data released this morning showed Germany retail sales rose +0.8% M/M in April, short of the expected +1.0%; the annual measure improved to -4.3% Y/Y (exp. -5.0%, prev. -8.6%). In the UK, house prices fell at a rate of 3.4% Y/Y in May (exp -3.7%, prev. -2.7%), according to Nationwide, which said that headwinds to the housing market look set to strengthen in the near term, though a relatively soft landing remains the most probably outcome.

NOTABLE MOVERS: Remy Cointreau (RCO FP) +4.8%, Recordati (REC IM) +4.1%, Anglo American (AAL LN) +2%, Antofagasta (ANTO LN) +1.9%, Leonardo (LDO IM) +1.8%, Rio Tinto (RIO LN) +1.7%, SAS (SAS SS) -14% Pennon (PNN LN) -1.8%

STOCK SPECIFICS: In M&A, L'Oreal (OR FP) is mulling expansion in China through acquisitions, CEO said. Lonza Group (LONN SW) is to purchase biotech firm Synaffix for EUR 100mln cash. In tech, of note for SAP (SAP GY), US peer Salesforce (CRM) saw shares fell 5.8% afterhours, despite beating on the top and bottom lines and raising guidance, with some citing concerns surrounding costs, while others flagged the slowest quarterly revenue growth since 2010. For tech communications, Ericsson (ERICB SS) and Intel (INTC) will collaborate to show how 5G adoption can be accelerated. CDP is to hold a board meeting on Thursday and will not discuss the offer for Telecom Italia's (TIT IM) landline grid. In healthcare, FDA approved AstraZeneca’s (AZN LN) Lynparza for BRCA+ Metastatic Castration-Resistant Prostate Cancer. Roche (ROGN SW) is reportedly looking to divest its Vacaville drug manufacturing plant in California. In consumer sectors, Remy Cointreau (RCO FP) annual profits topped expectations, though it maintains its outlook. Of note for Richemont (CFR SW) and Swatch (UHR SW), Swiss Watch Export growth pared to +6.8% Y/Y in April (prev. +13.8%). In financials, Moody's raises Banca Monte dei Paschi (BMPS IM) outlook to "Positive" from "Stable". In energy, BP (BP/ LN) and Equinor (EQNR NO) postpone the Bay du Nord Canadian deep water oil project for three years due to rising costs. Separately, Equinor said the gas leak that occurred at Hammerfest LNG plant on May 31st has been stopped, normalisation under way. Of note for materials names, Dow Inc (DOW) cut Q2 revenue guidance and said that overall macro conditions were expected to remain challenging as high inflation continues to pressure input costs and demand, particularly in Europe and the US, while China continues to experience a steady but uneven recovery. Johnson Matthey (JMAT LN) is reportedly looking to sell its medical devices unit, though no price was cited in the reports. In industrials, and of note for Leonardo (LDO IM), Italy removed an arms embargo on Saudi Arabia stating it was no longer necessary given the improved situation in Yemen. For the FTSE 100, going ex-div today: Informa (INF LN), Associated British Foods (ABF LN), Sage Group (SGE LN), Scottish Mortgage Investment Trust (SMT LN), National Grid (NG/ LN), Severn Trent (SVT LN); additionally, for the FTSE 100 reshuffle, IMI (IMI LN) will join the index, British Land (BLND LN) to leave, effective from the start of trading on June 19th. Of note for UK real estate names, Nationwide reported house prices fell -3.4% Y/Y in May (exp. -3.7%, prev. -2.7%), and said headwinds to the housing market look set to strengthen in the near term, though a relatively soft landing for the housing market remains the most probably outcome. Our full European equity morning briefings can be accessed here and here.

TODAY’S AGENDA:

• An interactive calendar can be found here; a pdf version can be accessed here.


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  EUROPE DATA/SPEAKERS: National inflation data for May across the bloc slowed even further than analysts were expecting, giving rise to hopes we could see similar in the Eurozone HICP data released in the morning; the consensus looks for the headline to decline to 6.3% Y/Y from 7.0%, although the core measure is expected to fall only more modestly, to 5.5% Y/Y from 5.6%. The ECB meeting minutes will be a stale affair. Final Eurozone manufacturing PMI data for May is expected to be unrevised, as is the UK gauge. From the UK, we will also get the Bank of England's Decision Maker Panel for May; this release usually garners a lot of attention since it is typically the last point we will get before a BoE meeting, however, last week's CPI Data has taken the sting out of the need for gauges like this, and in wake of that hot data, desks have been revising up their BoE calls, with analysts now forecasting the MPC will lift rates by 25bps on June 22nd, and will keep raising until a terminal rate of 5.0% has been reached. On the speaker's slate, ECB President Lagarde will speak again today, and there will be a text released. ECB's supervisory chief Enria is due to make remarks.


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  US DATA/SPEAKERS: The ADP and Challenger jobs data will provide our usual pre-NFP preview (NFP is out on Friday); and for good measure, we will also get the weekly initial jobless claims data (that data does not coincide with the survey period for the BLS jobs data). Any revisions to Q1 unit labour costs and productivity data will be released in the pre-market. After the open, the ISM Manufacturing survey is expected to see the headline little changed, although traders will be paying attention to the sub-components too. Fed's Harker (2023 Voter) will give another set of remarks today at the NABE.


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  CORPORATE EARNINGS: DG, LULU, AVGO are the earnings highlights for the day; our Daily US Earnings Estimates note can be accessed here.


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  ENERGY: The weekly DoE energy inventory data is expected to show a crude stock drawdown of 1.2mln, distillate stocks are seen building by 1.1mln, while gasoline inventories are seen drawing 0.2mln. Meanwhile, the EIA's NatGas storage change is expected to show a build of 106BCF vs last week’s build of 96BCF.


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  RECAP – US DEBT CEILING VOTE: The republican-controlled House approved a bill by a margin of 314-117. The legislation extends the government's borrowing limit until January 1st, 2025, enabling Biden and Congress to defer the politically sensitive matter until after the November 2024 presidential election. Additionally, it imposes spending limits for two years, streamlines permitting for select energy projects, recovers unused COVID-19 funds, and broadens work requirements for food aid programmes. House Leader McCarthy lost the support of 71 in his own party, but 149 Republicans eventually voted in favour of the bill, joined by 165 Democrats, allowing it to pass via a simple majority. Fox News noted that more Democrats voted for the Bill than Republicans. Now the bill goes to the Senate, where Majority Leader Schumer plans to schedule votes later this week. Senators may propose amendments to expedite the process, Politico said. Schumer and Senate Minority Leader McConnell aim to finalise the bill and send it to President Biden before the weekend, warning that lawmakers cannot risk amending the debt bill and sending it back to the House. The deadline to pass the bill is June 5th, when the government's borrowing limit is expected to be reached.

01 Jun 2023 - 08:10- Research Sheet- Source: Newsquawk