EUROPEAN EQUITY UPDATE: Euro bourses charge ahead despite hawkish ECB whilst the FTSE 100 struggles

Analysis details (10:08)

It has been a relatively eventful morning in the European equity space with the region now mostly positive after observing a mixed/directionless cash open. Euro-indices are clearly leading gains (Euro Stoxx 50 +1.2%; Stoxx 600 +0.7%) as sentiment across stocks improved from the mixed APAC and Wall Street performances. There has been little in terms of fundamental headlines behind the upside in the EZ, but a pick-up in momentum did coincide with further EUR strength following more hawkish commentary from the typically dovish Governing Council member de Guindos - desks have been suggesting that imported inflation is among the main problems for the region with the issue exacerbated by the Russia-Ukraine conflict, intimating that a firmer EUR would alleviate some pain from imported inflation in the short-term at least. US equity futures have coat-tailed on the upside in the EZ and the NQ (+1.1%) outpaces the ES (+0.8%), RTY (+0.8%) and YM (+0.7%) as Tesla (+7% pre-market) cheers beats on the top and bottom lines yesterday but the Co. warned of inflation challenges around supply chains have remained constant, and prices of some raw materials have increased multiple-fold in recent months. Analysts at JPM suggest “Consensus S&P 500 estimates imply an earnings recession, excluding energy and the impact of buybacks, a view that is overly pessimistic”, with the analysts revising down their 2022 S&P 500 EPS to USD 230 (prev. USD 235), “implying a ‘healthy’ ~10% y/y growth, to account for higher and stickier inflation and 50bp margin pressure.” Back in Europe, the CAC 40 (+1.4%) narrowly outperforms after the fallout of the French Presidential debate yesterday which deemed the market-friendly Macron more convincing. Elsewhere, the FTSE 100 (-0.1%) is the stand-out laggard despite the softening GBP as the index is pressured namely by its mining names. The Basic Resources sector lags with Antofagasta (-6.9%) and Anglo American (-6.9%) at the foot of the Stoxx 600 following underwhelming production metrics, whilst Glencore joins in sympathy and amid ex-dividend trade; BHP (-1.4%) is slightly more cushioned in comparison following its respective update. Sectors do not portray a clear bias and any theme is somewhat clouded by earnings: the Consumer Products and Services sector is propped up by Nestle (+1.4%) after respectable metrics, whilst conversely, Carrefour (-4.2%) weighs on the Optimised Personal Care and Grocery sector post-earnings – with the common denominator between the statements being an expected rise in inflation in Q2. Sticking with sectors, Travel & Leisure is the current winner in Europe as airline names soar (IAG +5.3%, easyJet +4.1%, Deutsche Lufthansa +3.4%, Air France +3.6%) amid tailwinds from post-earnings United Airlines (+7% pre-market) as the group expects a return to profitability in FY22 and sees indications that business travel is rapidly returning whilst expecting further improvement in international travel. Note, American Airlines is poised to report at 12:00BST/07:00EDT. Individual movers today are largely earnings-related: Akzo Nobel (+5.7%) topped revenue forecasts and expects cost inflation to gradually ease during H2, ABB (+5.2%) reported a strong backlog, Saipem (+10%) reported a 64.8% increase in adjusted earnings. From a more macro standpoint, traders are looking ahead to commentary from central bank heads Powell, Lagarde and Bailey alongside Russia-Ukraine developments.

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