EUROPEAN EQUITY UPDATE: Mixed/negative performance as initial upside wanes amid limited developments & a thin docket ahead

Analysis details (09:32)

European bourses opened with very modest gains of circa 0.3% in the Euro Stoxx 50, for instance. Following on from an initially mixed but ultimately firmer APAC handover as the region benefited from Chinese audit related updates and as we look to the next round of Ukraine-Russia talks due today. In terms of where we currently stand, European bourses are now mixed but with a slight negative bias coming to the forefront, Euro Stoxx 50 -0.3%. In a continuation of the fade seen in opening gains with limited fresh fundamental catalysts arising. As such, sectoral performance is mixed with Health Care names outperforming amid strength in Bayer (+2.5%) and Roche (+2.1%) after positive updates for asundexian and OCREVUS/Actemra respectively. Strength in the likes of Roche is helping to lift the SMI, +0.7%, to be the relative outperformer thus far; aided by Roche’s 17.79% weighting. At the other end of the spectrum lies Banking names impacted by NatWest (-1.5%) amid Sky News reports that it is considering an offer for Tilney Smith & Williamson, a Co. that is expected to fetch GBP 2.5-3.0bln in any sale. Note, sources highlight that a substantial number of banks/investors are expected to display an interest. Bank commentary includes JPMorgan’s Matejka saying that while a stall in activity momentum is seen as likely in the short term, it is not expected to reverse course with the equity case not as bearish as some portray. Adding, that the commencement of Fed tightening is not a negative for stocks during the early stages, following initial volatility. However, well known bear Wilson, Chief US Equity Strategist for Morgan Stanley, believes the bear market rally is over. Therefore, they are doubling down on a defensive bias and are more constructive on bonds vs stocks, in the near term. Finally, US futures are also adopting the negative European bias; but, action is much more contained at present, ES -0.1%, given a lack of fresh fundamental developments and a thin US schedule ahead. Reminder, over the weekend we had commentary from Fed’s Williams who didn’t add much to the rate discussion, but, highlighted that the balance sheet reduction could commence as soon as May.

04 Apr 2022 - 09:30- Fixed IncomeResearch Sheet- Source: Newsquawk