EUROPEAN EQUITY UPDATE: Hot inflation weighs on stocks

Analysis details (09:32)

Stocks in Europe (Eurostoxx 50 -0.2%) started Tuesday trading on a downbeat note following firmer than expected inflation data out of France and Spain, which resulted in yields ticking up in the fixed income complex, injecting some hawkishness into the implied path of ECB rates ahead. APAC stocks failed to sustain the initial upside momentum from Wall Street with a flimsy risk tone seen at month-end amid mixed data releases. US equity futures (ES -0.2%, NQ -0.3%, RTY -0.2%) are trading with a negative bias, falling in sympathy with peers in Europe. The day ahead sees the release of US Consumer Confidence and Chicago PMI whilst there will also be attention on remarks due from the Chicago Fed's Goolsbee, who is reportedly in the running for the Fed Vice Chair job. Analysts at Citi note that the past week saw a turn to markedly more bearish flows in several markets including the S&P 500 and Eurostoxx 50. Citi suggests that net positioning remains moderately bullish in both these markets and therefore a bearish turn of sentiment could run further if momentum in flows picks up. Equity sectors in Europe are mostly lower with the exception of Banking and Insurance names alongside the inflation-induced spike higher seen in bond yields today. To the downside, Construction names lag amid post-earnings losses in Travis Perkins (-3.6%), whilst Real Estate names are suffering from the aforementioned increase in yields. In terms of individual updates, index-heavyweight Bayer (-4.2%) sits at the foot of the DAX 40 after FY results came in below expectations. As well as benefiting from the more favourable rate environment, Santander (+2.2%) shares have been supported by the implementation of a new share buyback programme of up to EUR 921mln. Credit Suisse (-1.9%) is on the backfoot after it was confirmed by FINMA that the Co. breached supervisory law(s) regarding the Greensill case. Adidas (+1.1%) has benefitted from broker upgrades at both JP Morgan and Berenberg. Finally, Ocado (-9.6%) shares have been sent markedly lower after FY results showed that losses amounted to GBP 500mln last year.

28 Feb 2023 - 09:32- Research Sheet- Source: Newsquawk