EUROPEAN EQUITY UPDATE: Europe trims earlier gains whilst US futures consolidate in modest losses

Analysis details (09:41)

Equities in Europe faded the modest gains seen at the cash open (Euro Stoxx 50 +0.1%; Stoxx 600 -0.1%) as the region failed to sustain the impetus seen on Wall Street and APAC. US equity futures were subdued in the overnight session and dipped further in sympathy with Europe, but in the grander scheme, US futures have been consolidating since the reopening of electronic trade. There was little in terms of newsflow to trigger the paring of gains among EU bourses aside from the same overarching themes – inflation, hawkish central banks - but analysts at Barclays frame the European stocks picture as such: “Equities are seeking to strike a fragile balance between hope that inflation is peaking and fear of a recession. But absent a decisive drop in inflation, a central bank put still feels distant. Until the broad implications of tighter policy become clearer, markets may remain on edge, as the path to a soft landing is narrow”. The bank’s strategist is “overweight UK, market weight Europe vs. US and selective on emerging markets, says China reopening is a relief and could lift exposed names, but the medium-term growth outlook remains challenging.” Back to the session, most European bourses now trade with modest losses, but the Dutch AEX (+0.4%) outperforms and cushions the Euro Stoxx 50 in tandem, as chip-behemoth ASML (+1.0%), alongside other chipmakers, gain impetus from TSMC suggesting it is speeding up investment to build capacity for advanced and speciality chips to support client demand. As such the Tech sector is the second-best performer at the time of writing (with a similar performance seen in APAC), only trumped by Retail which derives support from Inditex (+4%) seeing a 36% Y/Y improvement in sales alongside an 82% rise in EBIT. The sectoral laggards include Banks – pressured by Credit Suisse (-7.3%) who issued profit warnings for its Investment Bank arm alongside the Group. The Swiss bank also provided interesting commentary in which it highlighted market volatility, and “weak customer flows and ongoing client deleveraging, notably in the APAC region" – banking peers trade lower in tandem. Overall, the sectors do not provide a clear theme. In terms of individual movers, UniCredit (-1.2%) has reportedly received four binding offers for its leasing unit - from, Bain, CRC, BPCE and HPS Investment Partners, according to Milano Finanza, albeit the stock has succumbed to Credit Suisse’s woes. Renault (+2.5%) is implementing a share buyback programme, for up to 1.26mln shares. Finally, AstraZeneca’s (+1.0%) Evusheld significantly prevented COVID-19 disease progression or death in TACKLE Phase III treatment trial.

08 Jun 2022 - 09:40- EquitiesResearch Sheet- Source: Newsquawk