EUROPEAN EQUITY UPDATE: Europe mostly firmer but off highs as markets gear up for Wall Street’s return

Analysis details (09:17)

• Equities in Europe kicked off Tuesday’s trade in the green following a mixed APAC session, which saw no lead from Wall Street amid the US Labor Day holiday. Sentiment this morning was somewhat choppy with futures retreating from best levels at the open, but ultimately holding onto gains despite a lack of fundamental drivers at the time and with a quiet schedule ahead. US equity futures remain firmer across the board with the NQ (+0.9%) narrowly outpacing the ES (+0.7%), YM (+0.7%), and RTY (+0.5%) at the time of writing. European bourses hold on to modest gains (Euro Stoxx 50 +0.4%; Stoxx 600 +0.4%) but trade off highs. Sectors are mostly firmer and now portraying a mildly anti-defensive/pro-cyclical tilt, with Healthcare, Utilities, Telecoms, and Food & Beverages towards the bottom of the bunch. The upside meanwhile sees Retail, Travel & Leisure, and Autos & Parts among the current winners. On the EU Consumer Discretionary sector, the desks at Jefferies and Berenberg believe consumer spending will inevitably decline against the backdrop of geopolitics, supply woes, and rising energy prices. Berenberg suggests the Goods and Retail segments of the sector are the most vulnerable, whilst the luxury sub-sector is more resilient amid its globally diversified nature.   


• In terms of movers, in energy, UK names are in focus as incoming PM Truss mulls freezing energy bills until the next election in 2024, The Telegraph said, which could be worth up to GBP 130bln for households, and around GBP 40bln in energy aid for firms. In utilities, Centrica (+3.1%) is reportedly in pre-emptive talks with banks to secure billions in additional credit to meet collateral demands amid extreme volatility in energy. On the deals front, there are vague reports that Bunzl (+0.7%) is attracting interest, according to The Times. Elsewhere, Rio Tinto (-0.3%) entered into an agreement with Turquoise Hill to provide short-term liquidity of up to USD 1.1bln during the transaction period. Safran (Unch.) entered talks with Thales SA (-0.8%) to acquire its aeronautical electrical systems activity, which generated revenues of EUR 124mln in 2021. In autos, Volkswagen (+2.5%) has announced intentions to IPO the Porsche Brand in September or October, depending on market developments; investors have forecast a EUR 60-85bln valuation. In travel, Deutsche Lufthansa (Unch.) pilots are to strike again on September 7th, although an improved offer is to be tabled later. On the index level, the DAX reshuffle on September 19th will see Siemens Energy (+2.1%) replace HelloFresh (+3.3%). In notable broker moves, Adidas (-0.8%) was downgraded at Berenberg, Delivery Hero (+7.3%) upgraded at Morgan Stanley, and Remy Cointreau (-1.9%) downgraded at Kepler Cheuvreux.  

06 Sep 2022 - 09:16- Research Sheet- Source: Newsquawk