EUROPEAN EQUITY UPDATE: Euro bourses gain but the UK plays catchup whilst traders look ahead to a risk-packed week

Analysis details (10:17)

The mood across Euro-bourses is positive (Euro Stoxx 50 +1.0%; Stoxx 600 +0.8%) following the late-door gains seen on Wall Street yesterday, whilst the FTSE 100 (-0.2%) plays catchup after its long weekend. US equity futures are flat with an upside bias with relatively broad-based performance across the major contracts as the FOMC gears up for its two-day meeting with a 50bps move expected. Sticking with central banks, the BoE is also expected to deliver a 25bps hike this week against the backdrop of rampant inflation, with the latest S&P Global Manufacturing PMI also giving a dire evaluation of April inflation in the sector – suggesting “The inflationary situation is getting increasingly fraught.  Input costs rose to the second-greatest extent in the 30-year survey history, leading to a record increase in factory gate selling prices…. which is likely to further constrain household spending and reinforce the cost-of-living crisis.”, S&P Global says. Norges Bank is also on the docket this week following its Scandi-peer Riksbank’s surprise hike last week. Other scheduled risk events aside from central banks include the US labour market report on Friday. Back to trade, IFR suggests the implied volatility for the Euro Stoxx 50, the VSTOXX, has fallen back and filled that large gap is seen at yesterday’s open after surging to the highest in around one and a half months – “As such the market is caught in something of a no-man's land at present.”, IFR states. Sectors in Europe are mostly positive with Energy the clear outperformer as BP (+3.1%) cheers a beat in adjusted net and a new USD 2.5bln share buyback programme as investors overlook the hit from its Russia exit – which had previously been flagged. Banks are also propped up by the higher yield environment – with the German 10yr topping 1.00% for the first time since 2015 – and amid stellar earnings from BNP Paribas (+3.5%) after beating on all metrics and confirming guidance. Sticking with earnings, Covestro's (-7%) sales rose Y/Y but the Co. cut guidance. Deutsche Post (+0.8%) earnings increased Y/Y, and its CEO added that if China's lockdowns ease then the group could see a catch-up effect. Elsewhere, Luxury names trimmed gains after the Hong Kong GDP contracted deeper than expected in Q1, whilst Global Times posited the “contraction was due to weak performance in both domestic and external demand.” In energy, Italy has raised the windfall tax on energy firms' profits to 25% (prev. 10%) and approved a EUR 14bln aid package focused on energy relief. In industrials, Stellantis (+2.2%) is to invest USD 2.8bln in retooling two assembly sites in Canada to enable EV production. Finally, EDF (-3.8%) is pressured as it is to cut its Paluek-3 nuclear reactor output due to strike action.

03 May 2022 - 10:16- Fixed IncomeData- Source: Newsquawk