EUROPEAN EQUITY OPEN: Stocks open lower amid debt ceiling angst, soft China PMIs; initial German regoinal inflation slows, French inflation lower than expected

OVERNIGHT: Asia-Pac stocks mostly lower due to mixed sentiment on Wall Street amid debt ceiling jitters, weak China PMI data (we recap below), lower oil prices (see here), and North Korea tensions, as the pariah nation attempted to launch its first military spy satellite, triggering emergency alerts South Korea and in Japan. Aussie CPI data for April was above expectations, prompting some to revise up their RBA rate hike calls (see below). Our APAC wrap is here.

INDICES: At 08:10BST, Euro Stoxx 50 -0.9% at 4,253; FTSE 100 -0.6% at 7,476; DAX -0.9% at 15,761; CAC 40 -0.8% at 7,148; IBEX 35 -0.6% at 9,111; FTSE MIB -0.8% at 26,363; SMI -0.1% at 11,276 .

EUROPEAN OPEN: European equities are on the back foot at the start of the mid-week session, with trader caution amid debt ceiling jitters in the US (hardliners have indicated that they will not vote for the deal; it faces a House vote later today), and softer than expected China PMI data (we recap the details below). European fixed income is rallying after initial German regional inflation data was lower than expected, which follows cooling inflation in Spain; the French inflation metrics also fell short of expectations.

EUROPE INFLATION: Ahead of the national CPI and HICP data out in the European afternoon, initial data from German regions suggests a slowdown is on the cards. North Rhine-Westphalia CPI was -0.2% M/M in May (Prev. 0.5%), with the annual measure falling to 5.7% Y/Y from 6.8%, while the ex-food/energy reading eased to 5.0% Y/Y from 5.5%. Bunds have rallied in wake of the data, taking encouragement from both today's lower German prints, and the lower Spanish data released on Tuesday, which augur well for the Eurozone-wide release on Thursday. The street expects German HICP to rise 0.2% M/M in May (prev. 0.6%), though the annual gauge is seen falling to 6.8% Y/Y in May from 7.6% previously. There was another boost to the fixed income complex after French flash inflation data, which was also softer than expected (HICP 6.0% Y/Y falling from 6.9%, and under the expected 6.4%). Other data showed German import prices -1.7% M/M, a deeper fall than the -0.5% expected decline; the annual measure fell to -7.0% Y/Y (exp. -5.9%) from a prior -3.8%.

NOTABLE MOVERS: MorphoSys (MOR GY) +3.5%, B&M (BME LN) +2.6%, J.D. Wetherspoon (JDW LN) +2.4%, UCB (UCB BB) +1.1%, Entain (ENT LN) -3.2%, Drax (DRAX LN) -2.8%, Heineken (HEIA NA) -2.7%, ITV (ITV LN) -1.7%, Banco BPM (BAMI IM) -1.5%

STOCK SPECIFICS: In M&A, Glencore (GLEN LN) is reportedly preparing a sweetened bid for Teck Resources (TECK), which could be announced in the coming weeks. In energy and utilities, Enel (ENEL IM) is reportedly mulling a top management shakeup, which could see the CFO replaced. TotalEnergies (TTE FP) and TES join to develop a full-scale E-NG production unit; project is expected to benefit from tax credit under 2022 US IRA. UK regulators are investigating Drax’ (DRAX LN) compliance with reporting requirements relating to renewables obligations. In autos, Stellantis (STLAM IM) announced its ACC battery gigafactory inaugurated in France, the first of three planned in Europe. In other consumer sectors, Entain (ENT LN) gave an update on HMRC’s investigation, said negotiators deferred prosecution agreement, including review of former Turkish-facing business, with potential for a substantial financial penalty. Mexico’s FEMSA announced it is offering around EUR 3.3bln worth of shares in Heineken (HEIA NA). WH Smith (SMWH LN) noted continued strong momentum across global Travel business; expectations for the full year increased. In financials, Credit Suisse (CSGN SW) has reportedly dropped a plan for a local bank licence in China to avoid potential regulatory conflict arising from the merger with UBS (UBSG SW). Prudential (PRU LN) appointed Ben Bulmer as CFO. Our full European equity briefings for May 31 can be found here and here.

TODAY’S AGENDA:

31 May 2023 - 08:10- Fixed IncomeData- Source: Newsquawk

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