EUROPEAN EQUITY UPDATE: A sombre mood with the UK off amid The Queen’s funeral ahead of a central bank packed week.

Analysis details (09:50)

The subdued tone seen across a holiday-thinned APAC session reverberated into Europe, with UK markets closed due to the funeral of Queen Elizabeth II. Participants remain cautious ahead of a myriad of central bank announcements this week, including from the FOMC, BoE, BoJ, and SNB to list a handful. The quant desk at Morgan Stanley sees the odds of capitulation rising in the stock markets – “Global macro hedge funds are betting on a tactical scenario for another 50bps rise in UST 10Y yield and terminal rate, which might send the S&P500 to a new YTD low (3600) and the MSCI EM to our bear case target (890),”, MS strategists wrote, advising that staying overweight cash is the best hedge against downside risk for now. Meanwhile, in geopolitics, Russia and China have agreed on further cooperating on defence with a focus on joint exercises, whilst US President Biden said the US would defend Taiwan from a Chinese attack. China said President Biden’s remarks on Taiwan 'severely violate' US policy over the island. Back to today’s trade, US equity futures are softer in tandem with their European counterparts with relatively broad-based losses seen across the main December contracts. European cash bourses are lower across the board but off worst levels (Euro Stoxx 50 -0.7%; Stoxx 600 -0.4%), with newsflow also on the lighter end this morning. Sectors are mostly lower with no overarching theme, whilst energy sits as the standout laggard due to the decline in seen crude prices. In terms of individual movers, Valneva (-13%) sits towards the bottom of the Stoxx 600 after the Co. and IDT Biologika agreed on the termination of their COVID-19 collaboration. Finally, Volkswagen (+0.5%) sees choppy trade and trimmed earlier gains following reports it is seeking a EUR 70-75bln valuation for the Porsche AG IPO (vs top-end estimates of EUR 85bln).

19 Sep 2022 - 09:25- Research Sheet- Source: Newsquawk