EUROPEAN EQUITY UPDATE: Europe sees early positivity, but news flow remains quiet ahead of PCE

Analysis details (10:24)

European equities opened on the front foot on the last trading day of the month (Euro Stoxx 50 +1.3%; Stoxx 600 +1.1%), following a constructive APAC session which also observed thinner liquidity with Japan away and ahead of China's holiday for most of next week. Overnight, the Chinese tech sector was bolstered amid a slew of constructive Chinese headlines in the form of Politburo pledges, upbeat China-US audit commentary, whilst SCMP sources also suggested that China end the regulatory storm over Big Tech and give the sector a bigger role in boosting the slowing economy – Alibaba (+13%) and Bilibili (+14%) are among the stocks with double-digit percentage gains in the pre-market. State-side futures were dented overnight amid after-hours losses in Amazon (-9% pre-market) and Apple (-2.4% pre-market) following disappointing guidance and inflationary headwinds. Thus, the NQ (-0.8%) currently lags vs the ES (-0.5%), RTY (Unch) and YM (-0.2%). Back in Europe, broad-based gains are seen across the EZ majors despite higher-than-forecast EZ core/super-core inflation metrics for April and slightly below-forecast prelim Q/Q Q1 EZ GDP, whilst the UK's FTSE 100 (+0.3%) straddles in comparison, with a firmer Sterling among one of the behind the underperformance. Further, the index's largest weighted stock – with a 6.7% weighting - AstraZeneca (-0.5%) is softer post-earnings and is subsequently capping gains across the healthcare sector. Delving deeper into sectors, Tech currently stands as the clear outperformer amid the sectoral gains on Wall Street yesterday alongside the surge in Chinese Tech. Overall, sectors have a slight anti-defensive bias. The European earnings slate has also been busy once again: in banking - BBVA's (+4.0%) net profits rose Y/Y, supported by Mexico operations, whilst Caixabank's (+2.0%) adjusted net profits were up Y/Y, and Danske Bank's (-3.8%) profits were below expectations. Eni's (+0.9%) results were better than expected on strong pricing. In terms of commentary, UBS Wealth Management suggests that investors should focus on adjusting asset allocation to surging inflation as it is not yet time to position for a recession - "Positioning portfolios for recession means deciding that the Fed will fail to win a game in which it ultimately controls nearly all the cards and sets nearly all the rules," the Swiss bank says.

29 Apr 2022 - 10:23- EquitiesResearch Sheet- Source: Newsquawk