EUROPEAN EQUITY OPEN: Stocks open mixed ahead of key PMI updates

OVERNIGHT: Stocks were pressured on Wall Street amid disappointing earnings, soft economic data, and hawkish monetary policy commentary from Fed officials. Traders were also said to be mindful of option expiries on Friday. (Our US wrap can be accessed here). The overnight APAC session saw stocks mostly lower, tracking the losses on Wall Street. Aussie stocks were pressured by weakness in Financials, and underperformance in Miners after BHP's quarterly production figures. Japanese stocks traded indecisively following mixed PMIs, and as participants digested inflation data, which were mostly in line. Chinese shares underperformed amid ongoing US-China frictions, and as President Biden is to unveil China investment curbs prior to the G7 summit in May, while Treasury Secretary Yellen said national security may come at a cost in the US-China relationship. There was also fierce rhetoric from Chinese Foreign Minister Qing Gang who said that both sides of the Taiwan Strait belong to China, and warned that those who play with fire on Taiwan will eventually get themselves burned. (Our APAC wrap is here)

EUROPEAN OPEN: A cautious risk mood is being seen on the last trading day of the week, and European equities have opened flat/mixed. This week’s performance has also been mixed/flat, with the narrow gauge of European blue chips (Stoxx 50) on course for small weekly losses, snapping a four week run of gains, while the broader Stoxx 600 is on track for small gains. This narrative is subject to change after today’s flash PMI data (see day ahead, below), while there is also a handful of further Fedspeak due today ahead of the pre-meeting blackout window. Data this morning showed UK retail sales declined by 0.9% M/M in March (exp. -0.5%, prev. +1.1%). The ONS noted that sales volumes were +0.6% in the three months to March 2023 vs the previous three months, representing the first 3m/3m rise since August 2021. Analysts noted that the reporting period for the March retail sales covered 26 February to 1 April, so excludes the Easter holiday period, while wet weather conditions were also said to have restrained consumer spending levels in the month. The data also appeared glummer than consumer confidence metrics, which posted a rise in April. However, even when taking these factors into account, Capital Economics said that although the outlook for retail sales was not as bad as it was, higher interest rates suggest that real consumer spending is more likely to decline this year than rise.

STOCK SPECIFICS: Once again, earnings are dominating: German business software maker SAP (SAP GY) reported Q1 sales rose 10%, topping estimates, though operating profit declined 45%, and adjusted profits were short of expectations. In financials, Credit Suisse (CSGN SW) bondholders launch legal challenge in Switzerland against regulators’ decision to write down USD 17bln in securities as part of its rescue. EssilorLuxottica (EL FP) sales rose in Q1. Italian luxury goods company Ferragamo (SFER IM) reported sales fell 4% at current exchange rates, though it saw improvement in sales towards the end of the quarter, and that continued in April. Materials names will note the Aussie mining sector was under pressure overnight following a Q1 production update from BHP (BHP AT), where iron ore output was flat. Our full European equity briefings for April 21st can be accessed here and here.

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Flash PMI data out of Europe is the highlight: the general theme is expected to be an improvement in the manufacturing indices, a paring back in the services, with little change at the composite level; analysts have said that, going forward, the focus will be on how the recent banking woes affect activity. From the UK, improvements are expected to the manufacturing and composite indices, though services is seen little changed; analysts note that banking issues eased in the survey window, and that could bolster confidence that March’s decline could be reversed. There are a few items on the credit ratings schedule the desk will be monitoring: Moody's is due to review France (Aa2) and the UK (Aa3); S&P are due to review the UK (AA), Italy (BBB), the Netherlands (AAA) and Greece (BB). On the speaker's slate, ECB's Elderson and ECB's Vice President de Guindos are scheduled to speak today.


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  NORTH AMERICAN DATA/SPEAKERS: Although not something traders usually watch all that closely (the ISM data is considered a ‘better’ data print), the S&P Global PMI data will be of note to help guide expectations of what the ISM data will look like when it is released in early May, given the mixed performance that we have already seen from regional Fed manufacturing indices (decent Empire Fed survey, weak Philly Fed survey). On the speaker's slate, Fed's Harker (voter) will speak, and Fed's Cook (voter) will speak after the market close. Elsewhere, weekly Baker Hughes rig count data is due.


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  US CORPORATE EARNINGS: Earnings reports are due today from HCA, SLB, PG, FCX; daily earnings estimate can be accessed here.

21 Apr 2023 - 08:10- Fixed IncomeData- Source: Newsquawk