EUROPEAN EQUITY UPDATE: Equity rebound fades, but the region holds onto gains

Analysis details (10:22)

The firm gains seen at the European cash open have faded throughout the European morning. The region, however, holds onto some upside (Euro Stoxx 50  +0.3%; Stoxx 600 +0.5%) in what has been another morning abundant with geopolitical headlines – with reports suggesting Russia has entered Ukraine’s capital whilst Moscow prepared a package of sanctions to hit the West’s weak points, according to Interfax. US equity futures have been subdued since the US cash close after Wall Street saw a major intraday reversal. US equity futures trade with losses ranging from 1.0-1.3% early in the European session in what continues to be a headline-driven market ahead of January US PCE. In terms of macro commentary, Citi analysts say geopolitics are rarely the cause of a full-blown recession, and equity corrections surrounding wars can be sharp but tend to be short-lived. “That said, for risk assets to stabilize, there needs to be a halt to the parabolic rise in energy/ags markets. Risk assets are concerned about high inflation, lower growth and an absent policy put.”, the desk caveats. Meanwhile, Goldman Sachs cut its Stoxx 600 target to 490 from 530 on the Ukraine risk, whilst raising the FTSE 100 12-month target to 8,100 from 7,900. Back to the session, the UK’s FTSE 100 (+1.4%) outperforms its Euro peers amid outperformance in Basic Resources – with Russian-linked Evraz (+20%) and Polymetal (+9.6%) rebounding alongside the MOEX (+19%), albeit with the latter far off recent pre-invasion highs. The travel sector lags as airlines suspend flights in Russian and Ukrainian airspace. In terms of individual movers, BP (+2.2%) is firmer despite facing pressure from MPs to abandon its 20% stake in Russian oil Co. Rosneft. DAX-giant BASF (-4.0%) weighs on the European chemical sector post-earnings. Volkswagen (+2.6%) and Porsche Automobil (+3.6%) are firmer after the former said in the event of a successful Porsche AG IPO, Volkswagen is to distribute a special dividend amounting to 49% of gross proceeds.

25 Feb 2022 - 10:22- EquitiesResearch Sheet- Source: Newsquawk