EUROPEAN EQUITY UPDATE: Early equity upside fades as markets eye several upcoming risk events

Analysis details (09:29)

Equities kicked off the mid-week and final session of the month with mild gains across the board before reversing and turning lower within the first hour of cash trade. There was no particular update that sparked the reversal, although participants should be aware of several upcoming key risk events including the EZ CPI, Fed speakers, and US NFP on Friday. Add to that the month-end dynamics in which Citi’s model points to equities selling and bond buying. From a macro perspective, analysts at Jefferies note that “global equities are at an inflection point as the summer bounce is starting to fade. The rising cost of debt and a slowing economy will be the two key headwinds, fueling the return of quality investing. The beneficiaries also include price momentum, low vol, high-quality yield, low financial leverage and well-held stocks with inflows.” Back in Europe, cash markets are mostly lower (Euro Stoxx 50 -0.2%; Stoxx 600 -0.2%) after an open that saw gains to varying gains – with the Euro Stoxx 50 commencing the session +0.5%. The AEX (+0.1%) narrowly outperforms – cushioned by ASML (+2.0%) following a broker upgrade – in turn lifting the broader Tech sector. Sectors in general are mostly lower with no overarching theme. Tech and Banks outperform, the latter on a favourable yield environment. Basic Resources names also cheer some China-driven gains in base metals. Meanwhile, the other side of the spectrum sees Utilities lagging, with Uniper (-3.3%) pressured as Nord Stream 1 flows are halted for three days. In terms of individual movers, on the index level, Abrdn (-0.8%) and Hikma (-1.1%) will be relegated from the FTSE 100 as part of the reshuffle; F&C Investment Trust (-1.1%) and Convatec (-1.5%) will be promoted. Fraser Group (Unch) is thought to have just missed out on a promotion. In board room news, Airbus (-1.7%) CFO to leave in 2023. In M&A, Italy is looking to back Air France-KLM (+0.9%) and Delta Airlines (DAL) for the ITA Airways stake. Elsewhere, the UK is ready to accept antitrust remedies proposed by Bouygues (-0.2%) and Equans to push through the EUR 7.1bln deal for Engie (-0.9%) construction unit. China's Geely and an oil group are said to be in discussions regarding a potential stake in Renault's (+2.9%) combustion engine business. In materials, Anglo American's (+2.2%) rough diamond sales grew Y/Y. In financials, UniCredit's (+3.3%) second tranche of share buyback of EUR 1bln has been approved by the ECB.

31 Aug 2022 - 09:29- EquitiesData- Source: Newsquawk