EUROPEAN EQUITY OPEN: Stocks rise at the open amid US debt ceiling hopes; Lagarde and Bailey ahead

OVERNIGHT: On Wall Street, stocks rallied Wednesday amid optimism around progress on raising the US debt ceiling, more promising consumer earnings reports, and a constructive regional banks update. Our US wrap is here. APAC stocks rose, taking impetus from Wall Street, although gains were capped as participants digested soft data releases. Aussie jobs data showed a surprise contraction in the Employment Change, and saw an uptick in the Unemployment Rate; some suggested that the data would give credence to the argument that the RBA's tightening cycle was likely to have concluded. Japanese stocks were supported by news of potential Japanese subsidies for chipmakers following PM Kishida’s meeting with foreign chip executives, though weaker-than-expected trade data saw enthusiasm curbed; the data showed imports fell for the first time in 27 months, while exports grew at the slowest pace in 26 months. In China, the positive mood was capped by disappointing earnings from Tencent, as well as the news that Montana became the first US state to ban TikTok. Our APAC wrap is here.

EUROPEAN OPEN: With many European traders away for Ascension Day, there is a quiet feel to Thursday’s start. Equities rose after the open amid hopes that a US debt ceiling deal could be potentially wrapped up by the weekend supporting the mood. More domestically, traders will be focussing on a heavy slate of central bank speak, from both the BoE and ECB, where the central bank’s chiefs are both scheduled to speak today (see Day Ahead, below). As the US day comes into focus, traders will be watching numbers from consumer staples megacap Walmart (WMT) given the mixed tone seen in retail earnings this week, while weekly jobless claims data will help inform Fed expectations as officials continue to threaten a more hawkish policy course if inflation does not behave. 

STOCK SPECIFICS: In M&A, French software firm ESI Group (ESI FP) is mulling a sale amid takeover interest, including from larger rival Dassault Systemes (DSY FP). Informa (INF LN) to purchase Winsight for USD 380mln. Hardware communication names like Ericsson (ERICB SS) and Nokia (NOKIA FH) will note US giant Cisco's (CSCO) shares fell in afterhours trading following its results, with analysts citing concerns around declining orders, while some expected FY revenue view to be raised. Burberry (BRBY LN) reported a sales jump in Q4 amid China rebound, where revenue was accelerating. Premier Foods (PFD LN) saw profits rise above expectations, and it boosted its dividend. Of note for automakers, Germany's VDA auto industry group said adjustments must urgently be made to the post-Brexit agreement as the European battery industry has not developed quickly enough and tariffs would be a significant disadvantage regarding competition. Volkswagen (VOW3 GY) brand plans a EUR 3bln cost savings programme. Aston Martin (AML LN) announced that Geely had made a substantial investment in the automaker, committing GBP 234mln, and becomes the third largest shareholder. In communications, BT (BT/A LN) posted a 5% rise in FY earnings, which was in line with street expectations. In financials, Deutsche Bank (DBK GY) will pay USD 75mln to settle Jeffrey Epstein accusers' suit. Of note for UK utilities, water industry pledges to spend GBP 10bn over seven years to reduce sewage spills. In industrials, S&P raised Ryanair (RYA ID) credit ratings by one notch. EasyJet (EZJ LN) reported a H1 loss that was in line with the consensus, though is confident on summer trends. National Grid (NG/ LN) saw annual profits rise 15%. IDS (IDS LN) saw a GBP 1bln annual loss. In energy, A Petrofac (PFC LN)-led JV was selected for a USD 1.5bln EPC project within Algeria. In the UK, going ex-div today: Pershing Square Holdings (PSH LN), Bunzl (BNZL LN), GSK (GSK LN), Unilever (ULVR LN), Shell (SHEL LN). Out full European equity briefings for May 18 can be accessed here and here.

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: Ascension Day in Europe means that there are limited closures, though France and Spain are still open. There is not much on the slate in terms of data releases. Spain will sell EUR 5.5-6.5bln of 2025, 2027, 2028, and 2043 Bonos. BoE's boss Bailey (Neutral), Broadbent (Neutral) and Ramsden (Hawkish) will speak at a Treasury Select Committee hearing on QE; BoE's chief economist Pill (Neutral) will speak on Macroeconomics & Finance; BoE outgoing MPC Tenreyro (Dove) will appear at a EUI Conference in Italy. ECB President Lagarde (Dovish) at an Awards Ceremony, while we also expect another round of comments from ECB Vice President de Guindos.


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  US DATA/SPEAKERS: Weekly initial jobless claims are seen at 254k from 264; this week's initial jobless claims data coincides with the BLS survey window for the May jobs data. Meanwhile, continuing claims are expected to rise a touch to 1.818mln from 1.813mln. There will also be a great deal of attention on the Philly Fed manufacturing survey for May given the grim Empire Fed data out earlier in the week; the latest industrial production data, however, offered a more constructive mood. After the open, US existing home sales for April are seen paring to 4.3mln from 4.4mln. The US leading index is expected to slip 0.6% M/M. On the speakers slate, there is a lot of Fedspeak due: Fed's Vice Chair nominee Jefferson (Voter, Neutral) speaks on the Economic Outlook, Fed's Barr (Voter, Neutral) will give the second leg of testimony at the Senate Banking Committee, and Fed's Logan (2023 Voter, Neutral) will also give remarks. It is worth noting that on Friday, Fed boss Powell and the influential NY Fed chief Williams will speak. BoC's Macklem and Rogers will speak on the Financial System today, while in EM central banks, Banxico is expected to hold rates at 11.25% (our Banxico primer can be accessed here).


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  CORPORATE EARNINGS: Earnings are due today from BABA, WMT and AMAT; our Daily US Earnings Estimates note can be accessed here.


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  ENERGY: EIA NatGas storage change data for the week ending May 8th is expected to show a build of 108 BCF (prev. 78 BCF).

18 May 2023 - 08:10- EquitiesData- Source: Newsquawk