EUROPEAN EQUITY UPDATE: Choppy and indecisive trade overall, but CAC remains underpinned by LVMH

Analysis details (10:07)

It’s been a choppy session thus far for the majors in Europe (Euro Stoxx 50 Unch; Stoxx 600 Unch) - which have been swinging between gains and losses throughout the morning following a mixed APAC handover. US equity futures are firmer across the board (ES +0.6%, NQ +0.7%, RTY +0.8%, YM +0.7%), and the front-month contracts have maintained a steady grind higher since the resumption of trade overnight after Wall Street closed with losses. With the US earnings season about to get underway (BLK, DAL and JPM today), BofA strategists have expressed some concerns about the outlook for stocks. “High and persistent inflation is turning the Fed from a suppressor of vol and source of returns to a source of vol and suppressor of returns”, and the strategists suggested this environment “skews our outlook for equities negatively.” Back in Europe, the CAC 40 (+0.5%) has been the most resilient of the bunch, with underlying strength owed to LVMH (+0.8%) following stellar earnings – with the stock accounting for 5.9% of the Euro Stoxx 50 and 12.1% of the CAC 40. Interestingly, European peers have failed to benefit from the overall upbeat commentary from the luxury giant, with Kering (-0.4%), Pandora (-0.1%), and Swatch (-0.6%) all subdued. The FTSE 100 (+0.1%) has also been holding its head above the water since the cash open as exporters benefit from the favourable Sterling dynamics whilst Energy and Basic resources reside as the current outperforming sectors. Delving deeper into the sectorial configuration, no real bias nor theme can be seen; Travel & Leisure, Retail and Personal Goods sit at the foot of the bunch. In terms of individual movers, EDF (+3.1%) has been on a grind higher as reports in BFM, citing sources, suggested that France is looking at restructuring plans for the Co. that would follow a full nationalisation followed by the sale of its renewables business which would allow it to focus on nuclear energy – the sale of its renewables business could fetch EUR 15bln, according to an unidentified banker. Meanwhile, Tesco (-6.0%) extends on its earlier losses as the above-forecast UK inflation metrics overshadow the respectable but backwards-looking earnings, with the CEO also expressing concerns regarding price pressures in post-earnings comments. In terms of a European equity strategy, analysts at Barclays suggested that the fate of equities largely depends on earnings as the cushion from depressed yields fade – “But the focus will be on the outlook given the uncertainty, in particular pricing trends, rising costs' impact on margins, and signs of softening demand.”

13 Apr 2022 - 10:07- EquitiesResearch Sheet- Source: Newsquawk