EUROPEAN EQUITY UPDATE: Europe plays catchup, FTSE 100 cushioned by Sterling losses, and US equity futures consolidate

Analysis details (10:13)

Equities in Europe are lower across the board (Euro Stoxx 50 -1.3%; Stoxx 600 -0.8%) as the region plays catch-up to the late losses seen on Wall Street after Fed Chair Powell further solidified his hawkish stance. APAC markets were mostly lower, but Mainland China bucked the trend following reports that China's State Council Financial Committee hosted a meeting on Friday and vowed to ensure the stable and healthy operation of the capital market. US equity futures trade relatively flat with a mild downside bias but with the performance broad-based (ES -0.1%, NQ -0.1%, RTY -0.1% and YM -0.1%). With earnings season underway, strategists at Barclays note that the early Q1 metrics are reassuring, with the above-forecast numbers potentially lifting equities, although the desk caveats that it is still early days as 15% of the US reported alongside less than 10% of Europe. Meanwhile, EPFR data via BofA in their weekly flow show (in the week of Apr 20th) showed the largest equity outflow of the year thus far: US equities saw the largest outflows since December at USD 19bln, and Europe saw the 10th consecutive week of outflows at USD 2.9bln. Back in Europe, Euro-bourses have held onto losses despite the higher-than-forecast EZ flash PMIs. Under the hood, the EZ release warned that “Average prices charged for goods and services rose at an unprecedented rate in April as these higher costs were passed on to customers, sending a worrying signal that inflationary pressures continue to build”. For context, next week sees the EZ Flash CPI metrics and this will be key for investors given the recent hawkish ECB rhetoric alongside the aggressive rate pricing. Moving on, the FTSE 100 (-0.3%) is cushioned by Sterling dynamics as the pound loses further ground amid sub-par Retail Sales and Flash PMI metrics – whereby the latter noted “Survey respondents often cited subdued consumer demand due to squeezed household finances and rising prices for essential items. Similarly, business-to-business spending was hit by higher operating expenses, inflation concerns and geopolitical uncertainty.” Sectors in Europe portray a clear defensive bias, with Personal Care & Grocery, Food & Beverages, Utilities, Telecoms and Healthcare towards the top of the bunch, with the former two the only sectors in the money. Meanwhile, the other side of the spectrum sees Energy, Retail, Travel & Leisure, Tech, and Consumer Products and Services – with Tech pressured by a rise in yield alongside post-earnings losses from SAP (-3.0%) as EPS missed, with the stock accounting for 8.1% weighting in the DAX 40 and a 4.2% weighting in the Euro Stoxx 50. In terms of other movers, Kering (-5.3%) weighs on the broad luxury after Gucci's performance underwhelmed, with LVMH (-1.8%), Moncler (-2.2%), and Burberry (-2.3%) lower in sympathy. Elsewhere, AB InBev (-3.0%) is hit amid reports of a USD 1.1bln non-cash impairment charge associated with the sale of its Russian JV.

22 Apr 2022 - 10:12- EquitiesData- Source: Newsquawk