EUROPEAN EQUITY UPDATE: Losses seen across Europe and US futures amid US-China jitters and looming Fed speakers

Analysis details (10:26)

Bourses across Europe hold a downside bias following an overnight session where Asian equities were pressured. China led the losses amid geopolitical angst surrounding US House Speaker Pelosi's potential visit to Taiwan (click here for Newsquawk analysis), alongside China’s growth target withdrawal. US equity futures have also adopted this downbeat sentiment (ES -0.7%, NQ -0.8%, YM -0.5%) as participants also gear up for a triple-threat of Fed speakers later today, with Evans, Bullard, and Mester on the docket, and following Fed’s Kashkari’s hawkish remarks last week who pushed back on the notion of a Fed pivot. Meanwhile, analysts at Goldman Sachs warn that investors could be overconfident in betting on Fed cuts sooner – “We think markets will be vulnerable to hawkish surprises if inflation continues to struggle to re-set and growth surprises -- if the slowdown in activity results in a more prolonged/deeper downturn,” the desk said as they continue to favour selling calls to buy puts to hedge equity exposure. In the shorter term, Citi warns of the increasing risk of a short squeeze for stocks as the rally last week meant short positions across most markets being in deep losses. Sectors in Europe are mostly lower with a clear defensive bias, although energy bucks the trend amid blockbuster earnings from BP (+3.7%) who beat analyst expectations and boosted its share buyback and dividend. The downside meanwhile sees Tech, Financial Services, and Travel & Leisure. In terms of individual movers, activist investors are still calling for HSBC (-0.8%) to spin off its Asia unit, despite the bank pushing back on these calls. Elsewhere, shipping giant AP Moller-Maersk (+2.0%) rises after lifting its guidance on supply chain congestion.

02 Aug 2022 - 10:26- Research Sheet- Source: Newsquawk