EUROPEAN EQUITY UPDATE: Mixed trade in Europe and a subdued performance across US futures as traders await Fed speakers

Analysis details (09:57)

Bourses in Europe have reconfigured and now see a mixed picture (Euro Stoxx 50 +0.2%; Stoxx 600 -0.1%) after opening higher with broad-based gains of around 0.5-0.6%. In contrast, US equity futures were subdued as Europe kicked off trade, and have since remained under mild broad-based pressure. The risk mood will likely hinge on the Fed’s economic symposium at Jackson Hole, which will feature numerous central bank speakers, with the main event being the Fed chair at 15:00BST/1000:EDT. US PCE prices will be released before then (13:30BST/08:30EDT), and given that it is the Fed’s preferred gauge of inflation, it will garner attention as markets consider whether the Fed will be more likely to hike by 50bps or 75bps in September. In terms of commentary, analysts at Bernstein suggest “Sentiment is in neutral territory and is not pessimistic enough to make a positive call on the market… While equities are still ‘cheap’ compared to bonds in Europe, that’s no longer the case in the US”. Furthermore, Bernstein highlights that investors have not significantly sold global equity funds despite stopping purchases in Q2 and Q3. On that note, the weekly BofA flow show (to Wednesday) shows USD 5.1bln outflows from stocks. Delving into the breakdown, the US saw USD 1bln outflows (first in three weeks), Europe USD 2.6bln outflows (outflows for the past 28 weeks; longest streak since 2016), Japan USD 1.9bln outflows (outflows for the past five weeks). Back in Europe, sectors are mostly lower with no overarching theme. Basic Resources benefit from firmer base metal prices, whilst Banks cheer a rise in yields. Tech is also among the winners, with Micro Focus (+92%) almost doubling after Canadian software firm OpenText offered to buy out Micro Focus at a 98.7% premium to Thursday’s closing price. Elsewhere, UK energy names are modestly firmer whilst energy regulator Ofgem raised the UK consumers' energy price cap to GBP 3,549/yr (+80%, in line with expectations), and warned that prices could get significantly worse in 2023. Finally, GSK (+1.2%), Sanofi (+2.3%), and Haleon (+2.1%) are all trading higher after Citi has placed Sanofi on positive catalyst watch following recent legal developments that could materially reduce the Co's exposure to Zantac.

26 Aug 2022 - 09:57- Fixed IncomeImportant- Source: Newswires