EUROPEAN EQUITY UPDATE: European equities remain mostly subdued whilst US futures attempt a recovery

Analysis details (09:56)

The mood across Europe is subdued following a mixed APAC handover and after Wall Street eked mild gains yesterday, with investors cautious amid the prior session’s move in yields in the run-up to this week’s ECB (full Newsquawk preview available in the Research Suite), US CPI, and Chinese inflation. US equity futures are also softer but off worst levels, with a relatively broad-based performance across the ES (-0.4%), YM (-0.4%), NQ (-0.5%), and RTY (-0.5%). Analysts at BlackRock (in a note published yesterday) believe that markets are too hawkish about monetary policy. BlackRock remains neutral on equities and suggests the volatility will likely persist. The desk thinks the ECB will hike out of negative territory before pausing amid an energy-driven recession, whilst the strategists see US inflation “persistent and running above the Fed’s 2% target for years to come.” Meanwhile, JPM offers their view on small/mid-caps: “The math continues to paint a benign outlook for SMid-Caps with fundamentals still strong, valuation still undemanding, sentiment having already started to price in some of the risks, and technicals that point to pockets of opportunity and a potential short-term rally.” The bank warns of no visibility as “the macro [environment] continues to deliver conflicting data points”. Back to the session, The Swiss SMI (+0.2%) plays catchup following a domestic holiday yesterday, whilst the rest of Europe trades lower to varying degrees (Euro Stoxx 50 -0.7%; Stoxx 600 -0.4%). The FTSE 100 (Unch.) remains around the unchanged mark with the miners doing the heavy-lifting, whilst UK PM Johnson’s confidence win offers some solace for UK stocks in the form of stability and new policy commitments. Sectors are mostly in the red, with the laggards being Tech, Media, and Retail. The other end of the spectrum sees Basic Resources, Energy, Insurance, and Financial Services. The Basic Resources sector feels support from China’s reopening alongside a Jefferies note on the sector. The analysts' top European mining picks include Glencore (+0.9%), Anglo American (+0.6%), Rio Tinto (+1.0%), and BHP (+0.7%), as it says miners are “to greatly outperform over the next decade”, with “coal and iron miners the best for 3-6 months and copper miners long-term.” Meanwhile, chip names are subdued (Infineon -1.2%, STMicroelectronics -0.6%, ASML -1.0%) as Apple (-0.3% pre-market) introduced its M2 silicon chip which has an 18% better performance than the previous chip and will be used in Mac computers. In terms of individual movers, retailer Ted Baker (-23%) slumped in early trade as the Co. was informed by its preferred counterparty that it did not intend to proceed with an offer for Ted Baker. The Co. said it received several proposals, and the board will now decide whether to proceed with any of those proposals. Sticking with retail, JD Sports (-1.5%) confirmed it has received a provisional statement of objections and a draft penalty notice from the UK CMA after it provisionally found illegal price-fixing.

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