EUROPEAN EQUITY UPDATE: Initial pressure eases while China's COVID situation draws focus

Analysis details (09:55)

European bourses opened firmly on the back-foot, posting initial downside of as much as 2% in a continuation of the downbeat lead from their respective futures and the APAC session. Risk was pressured in overnight APAC amid renewed COVID-related caution out of China, with a press conference on the subject due at 10:00BST/05:00EDT; thus far, China has already announced two additional rounds of testing for at least nine prefectures. European sectors opened, and remain, in the red and feature a modest defensive bias, in contrast to Friday, which has brought the likes of the Health Care back into the proximity of unchanged levels. More broadly, current equity performance has seen an easing of the initial pressure, though news flow behind the moves has been limited, at best has seen a recovery of around half of the post-open pressure; however, this remains shy of Friday’s best levels and as such in familiar ranges. In terms of commentary, Wall Street bear and Morgan Stanley’s US equity strategist Wilson suggest that the stock rally is to wane as the US Dollar soars – whereby the 16% rise in the US Dollar Index over the past 12 months signals an 8% headwind for S&P 500 earnings per share growth. Currently, US futures are lower by circa 0.6% but, in-fitting with Europe, have made their way off worst levels. Finally, individual movers include Uniper (UN01 GY) who are -8% amid the Nord Stream 1 shutdown and despite being reiterated with Overweight at JPM due to a shareholder rejecting calls for further German government assistance. Elsewhere, Wizz Air are impaired as they intend to reduce utilisation by another 5% and as peer British Airways, IAG owned, cut the summer schedule by 20%. On the flipside, Dufry +6.5% outperforms amid their acquisition of Autogrill while EDF benefits from broker activity at JPM. The docket is thin from a European perspective and similarly limited for the afternoon. As such, headline-risk and USD action remain the likely focal points for the session ahead.

11 Jul 2022 - 09:55- EquitiesResearch Sheet- Source: Newsquawk