EUROPEAN EQUITY UPDATE: Europe holds onto losses whilst US futures trade tentatively ahead of US CPI

Analysis details (09:57)

The mood across European equities remains downbeat as the region plays catch-up to yesterday’s Wall Street tumble, whilst APAC (ex-Mainland China) followed suit overnight. The theme of central bank hawkishness against the backdrop of a growth slowdown seemingly continues to dictate the markets, with the ECB yesterday teeing up its hiking path whilst the FOMC next week is expected to deliver its second consecutive rate hike (Citi also expects the SNB to hike next week). Further, China’s COVID situation remains a wildcard for policymakers and forecasts as President Xi yesterday reiterated the second-largest economy’s “Zero-COVID” stance districts in Beijing and Shanghai tightened curbs – with Beijing seeing a jump in cases over the last 24 hours. US equity futures trade with modest gains with the ES (+0.2%) just about holding onto a 4,000 handle, whilst the NQ (+0.4%) narrowly outperforms after shedding the most yesterday. European cash bourses trade lower across the board (Euro Stoxx 50 -1.5%; Stoxx 600 -1.1%) with the Dutch AEX (-0.9%) and UK’s FTSE 100 (-0.9%) slightly more cushioned – with the former aided by Just Eat Takeaway (+7.5%) after finding suitors for its US unit Grubhub, whilst the UK sees some support from Grocery names alongside GSK (+0.7%) who announced positive pivotal phase III data for its respiratory syncytial virus (RSV) vaccine candidate for older adults. Meanwhile, the Italian FTSE MIB (-2.2%) experiences the deepest losses as its heavily BTP-exposed banking sector feels the brunt of the ECB refraining from announcing an anti-fragmentation tool (UniCredit -3.8%, Intesa Sanpaolo -3.7%, Banco BPM -3.9%), whilst Spanish banks feel a similar pain (BBVA -3.9%, Santander -2.8%). Sectors in Europe are all lower but largely hold a defensive bias. Basic Resources and Tech have made it up the ranks vs the open with the latter trimming losses as bond yields ease. The sectoral laggards include Real Estate, Construction, Retail, and Insurance. It’s also worth noting that the Luxury sector is feeling the jitters from China’s recent COVID updates (LVMH -1.8%, Pandora -2.2%, Richemont -1.8%). In terms of commentary, Goldman Sachs’ European Equity Strategist suggests “All value sectors have upside in Europe’s current high rates and inflation environment… Sectors that stand to benefit most include basic resources, commodities, material companies and energy stocks.” Looking at some individual movers, Credit Suisse (-4.0%) buckles as State Street said it's not pursuing any deal with Credit Suisse. Bayer (-0.8%) fails to gather much support after winning a Missouri court case regarding its Roundup weedkiller, marking the third consecutive trial win in the US, according to Bloomberg. Ericsson (-2.8%) is pressured as the US SEC told the Co. it has opened an investigation regarding the 2019 Iraq investigation report. Finally, on the flip side, Repsol (+0.4%) is firmer amid a report the Co is to sell its 25% stake in its Renewables Energy Unit for EUR 905mln to Crédit Agricole Assurances and Energy Infrastructure Partners (EIP).

10 Jun 2022 - 09:56- EquitiesData- Source: Newsquawk