EUROPEAN EQUITY UPDATE: Losses trimmed by Kremlin comments ahead of Powell

Analysis details (10:36)

Equities in Europe have reconfigured to a mostly higher environment (Euro Stoxx 50 +0.3%; Stoxx 600 +0.3%) after sentiment was lifted in conjunction with commentary from Russia's Kremlin, who suggested that Russia will not shoot itself in the foot with regards to countersanctions. Additionally, a Russian delegation will be waiting later today to continue talks, but said it is not clear if Ukrainian officials will attend the talks. It is however worth noting that the talks are not being carried out at high levels and thus the scope for a breakthrough remains slim. Nonetheless, US equity futures are firmer with the RTY (+0.8%) the marginal relative outperformer vs the ES (+0.6%), NQ (+0.6%) and YM (+0.7%) – ahead of a packed central bank slate, with Fed Chair Powell headlining with a testimony to the House (preview available on the Newsquawk Headline Feed), with traders wondering if the latest geopolitical developments have impacted monetary policy normalisation. In its equity strategy, analysts at Berenberg suggested that near-term risks skewed to the downside and would wait before taking on risk – but highlight technical indicators support investors taking on 6–12-month equity risk despite visible risks, although “a combination of our four risks ‘buckets’ – rich valuation/margin mix, macro, politics, geopolitics – and the absence of the post-GFC liquidity put reduces our near-term conviction.” Back to today’s session, the UK’s FTSE 100 (+0.8%) narrowly outperforms amid gains across heavyweight energy and basic resources – which remain the outperforming sectors since the cash open. The sectoral picture has turned less defensive throughout the session as Healthcare and Personal Goods make their way down the ranks whilst Tech, Insurance and Banks now reside in the green following earlier underperformance. Similarly, the early gains in Defense names have dissipated, with the stocks now residing as regional laggards. In terms of individual movers, Polymetal (+18%) is firmer post-earnings as amid an unwind recent Russia-induced downside. Ericsson (-11%) sits at the foot of the Stoxx 600 and weighs on the broader telecom sector after the US DOJ said the disclosure made before the Deferred Prosecution Agreement on its internal investigation into conduct in Iraq was insufficient.

02 Mar 2022 - 10:35- Fixed IncomeResearch Sheet- Source: Newsquawk