EUROPEAN EQUITY OPEN: Stocks open higher, on course to snap three weeks of declines; ECB and Fedspeak ahead

OVERNIGHT: On Wall Street, stocks firmed on Thursday, with the tech sector doing much of the heavy lifting. The positive mood was driven by constructive economic data, and easing concerns around the US debt ceiling negotiations, while there weren't any major stresses in Regional Banks after hawkish Fedspeak. Our US wrap is here. Overnight in Asia, stocks were mostly higher following the lead from Wall Street, though China markets lagged after disappointing sales stats from Alibaba. Japan's CPI figures were mostly in line with expectations, but showed a faster pace of acceleration. Pantheon Macro said the BoJ will recognise the likelihood of further food price hikes, as well as the economy’s tentative rebound in Q1, but is unlikely to make any significant policy changes at its June 16th meeting. Our APAC wrap is here.

EUROPEAN OPEN: European equity indices start the last trading session of the week on the front foot, and are currently on course to snap a three-week run of lower weekly closes. Data out of Germany showed producer prices rose +0.3% M/M in April (exp. -0.5%), while the annual rate slipped from 6.7% Y/Y in March to 4.1% in April (exp. 4.0%). In wake of the data, immediate downside was seen in Bund futures, with the June 2023 contract slipping from 133.98 to 133.81, and below Thursday's 133.85 low. SEB has remarked that given the time lag from the initial intermediate price increase (a component of PPI) to consumer prices was almost a year that while the April print is perhaps slightly early a plateau is likely to be reached in the short term, similar to that seen in input goods. Meanwhile, in the UK, GfK reported that consumer confidence was at -27 in May (exp -27.0) from -30.0 in April, printing the fourth consecutive monthly increase; Gfk said that rise was encouraging, adding that the positive trajectory seen this year suggests a potentially stronger financial landscape in the UK than previously anticipated. It added, however, that caution was advised as the recovery from may still present challenges and uncertainties ahead. There is focus on banks this morning after a report suggested that the ECB could increase scrutiny of banks on the continent following US regional bank issues and the failure of Credit Suisse. There is a lot of central bank speak ahead, on both sides of the Atlantic (from the ECB we have Lagarde and Schnabel; from the Fed we have Powell and Williams) – see Day Ahead, below, for more. Meanwhile, the dollar has seen some downside in early European trade after overnight reports had suggested that Chinese state-owned banks were reportedly swapping Yuan for Dollars in the onshore FX forwards market, which some said was a strategy to sweep up dollars from the swap market to reduce availability for yuan sales, a tactic used in previous episodes of yuan depreciation.

STOCK SPECIFICS: For banks, the ECB will reportedly increase scrutiny of bank liquidity following on from US regional bank issues and Credit Suisse' (CSGN SW) failure, and could even lift requirements, Bloomberg reports. The tougher requirements could be communicated later this year. Of note for Diageo (DGE LN) and M&S (MKS LN), members of the company's pension schemes might have had their personal data stolen during the cyber attack on Capita (CPI LN). Entain (ENT LN) is reportedly nearing a deal to buy a sports pricing and analytics firm for roughly USD 200mln. Of note for tech names, UK to offer companies as much as GBP 1bln over the next decade as part of plans to increase the nation's resilience in the sector. Fincantieri's (FCT IM) Marinette Marine unit won a US Navy contract worth over USD 500mln. Aker Solutions (AKSO NO) secured a NOK 0.5-1.5bln contract from Exxon's (XOM) Uaru project in Guyana. Smiths Group (SMIN LN) noted continued progress, saw record growth, raises FY 2023 guidance. Our full European equity briefings for May 19th are here and here.

DAY AHEAD: The Day Ahead is thin for scheduled data releases. Canadian retail sales are expected to extend their slump in March. Traders will also be watching the key weekly rig count data from Baker Hughes, after last week's release triggered a move in crude futures. On the credit ratings docket, Moody's is to review Italy (Baa3), and S&P will review South Africa (BB-). The docket is busier for central bank speakers, especially for influential Fed voters; today will feature remarks from Chair Powell, who will participate in a panel discussion with former Fed Chair Bernanke (we have a primer here), NY Fed's Williams, and Fed Governor Bowman (the latter two are due to speak in the US pre-markets). There are also influential ECB speakers on today's agenda, with President Lagarde and the central bank's markets honcho Schnabel scheduled to speak. Meanwhile, from the Old Lady, BoE hawk Haskel will give remarks. Our full interactive day ahead calendar can be accessed here, a pdf version can be accessed here.

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