EUROPEAN EQUITY UPDATE: Mixed trade for European stocks, FTSE 100 lags pre-BoE

Analysis details (09:30)

• European equities (Eurostoxx 50 +0.3%, DAX -0.5%) initially traded without firm direction following a downbeat US handover but have since slipped somewhat more convincingly into negative territory.


• The main event yesterday was of course the FOMC rate decision which saw the Fed deliver a widely expected 25bps rate hike and drop its reference regarding the view that ‘ongoing’ rate hikes will be appropriate. Downside for the US equity complex was in part attributed to comments from Treasury Secretary Yellen who noted that the Treasury is not considering insuring all uninsured bank deposits. Given that this is a more US-specific issue and banking contagion concerns have receded in Europe, this could explain why European stocks appear to be holding up a little better than the cash losses seen on Wall Street yesterday.


• Furthermore, it is also worth noting that US equity futures are attempting to claw back losses (ES +0.5%, NQ +1.0%, RTY +0.8%), albeit the ES is yet to reclaim the 4k mark to the upside. The docket for the US session today includes weekly jobs figures, New Home Sales with no Fed speak due on account of the blackout period.


• In terms of desk views, Citi has cut its FTSE 100 forecast to 7600 (prev. 8000, currently 7508) and its Stoxx 600 end-2023 forecast to 445 (prev. 475, currently 444); citing risks to growth and a volatile market environment. From a sector standpoint, Citi notes that it has a defensive tilt and has downgraded Banks, whilst upgrading Tech, reflecting its preference for quality growth.


• The FTSE 100 (-0.9%) is lagging peers amid a firmer GBP and expectations of a 25bps hike by the BoE later today following yesterday’s hotter-than-expected inflation data from the UK. Focus for the release will be on whether the MPC signals that further tightening is to come.


• Equity sectors in Europe are mostly softer with laggards comprising of Media, Banks and Construction, whilst Tech and Basic Resource names are the only sectors in the green.


• In terms of individual movers, Sanofi (+4.6%) sits near the top of the Stoxx 600 following news that Dupixent met endpoints in its phase 3 trial, whilst Prosus (+4.4%) benefits from post-earnings gains in Tencent (in which it holds a circa 27% stake. To the downside, Swatch (-3.4%) is suffering from a broker downgrade at Barclays.

23 Mar 2023 - 09:30- Research Sheet- Source: Newsquawk