EUROPEAN EQUITY UPDATE: Europe continues the global equity rebound with sentiment soothed heading into the US open

Analysis details (10:15)

The rebound across global equities has reverberated into Europe in a move initiated by the late rally on Wall Street following commentary from Fed Chair Powell - who suggested the central bank would be hiking in 50bps increments for the next two meetings (leaning back on calls for 75bps moves), but he also suggested that the Fed was prepared to do less if the situation improved or do more if the situation worsens, and added that whether a soft landing can be executed or not may depend on factors the Fed cannot control. This, alongside a seemingly improving COVID situation in China, has soothed market sentiment following the aggressive back-to-back selloffs this week, whilst a firm rebound in crypto prices could be adding to the risk appetite. The weekly BofA flow warned that stocks are prone to an imminent bear-market rally, and ultimate lows have not been met. In terms of the regional breakdown for equity funds: Europe saw outflows of USD 2.3bln (13th week of outflows), US funds saw inflows of USD 93mln (first inflow in five weeks) – whilst tech stocks saw a drain of USD 1.1bln (largest YTD outflow). BofA also posited that the crash in crypto and speculative tech rivals the GFC and internet bubble crash. Nonetheless, US equity futures are marching ahead with the NQ (+1.6%) outpacing the ES (+1.1%), RYT (+1.0%) and YM (+0.9%) as the Tech sector recoups some of its recent losses. In Europe, cash bourses extended on the gains seen at the open (Euro Stoxx 50 +1.3%; Stoxx 600 +1.2%). Sectors are all in the green but with no real theme aside from a reversal of recent price action – Travel & Leisure, Banks, and Tech reside as the current winners whilst Food & Beverages, Telecoms and Autos & Parts lag. For tech, the world’s second-largest chip manufacturer Samsung is reportedly in discussions to hike chipmaking prices by up to 20%, according to Bloomberg sources – which follows a similar move by the largest contract chipmaker TSMC earlier this week warned of a price hike of 5-8%; the two chip manufactures accounts for a combined global market share of over 60%. In terms of individual stocks news, Deutsche Telekom (+0.9%) saw its Q1 results top expectations on subscriber gains and boosted its guidance. Eni (Unch) is reportedly poised to make a Gazprom payment this month, even if the payment is converted to Roubles, according to Bloomberg. In crypto-related stocks news, GAM Holding (+1.7%) is negotiating with Terraform Labs to help support its Luna stablecoin, GAM is expected to invest between USD 2-3bln to absorb the excess supply of UST during its current selloff and seeks to re-establish its peg to the US Dollar. 

13 May 2022 - 10:15- Fixed IncomeResearch Sheet- Source: Newsquawk