EUROPEAN EQUITY UPDATE: Momentum fades as traders gear up for earnings and ECB ahead of the Easter break

Analysis details (10:21)

It’s been a divergent start to the last trading day of the holiday-shortened week, although the region is somewhat contained in recent trade. At the cash open, Eurozone equities were performing slightly better (Euro Stoxx 50 +0.2%) than their non-Euro peers in the run-up to the ECB policy announcement, where traders will be mindful of any hints of an early-end to APP and a potential 2022 rate hike, whilst President Lagarde’s presser will be dissected for updates on the economic outlook amidst the ongoing Russia-Ukraine war, and any official acknowledgement of a “crisis tool” to tackle yield spikes and widening of spreads, as posited by Bloomberg sources on April 8th (full Newsquawk preview available in the Research Suite). US equity futures consolidated overnight before tilting lower in early European trade alongside separate but unfriendly commentary from Russian officials and China’s MOFCOM. The NQ (Unch), ES (-0.1%), RTY (-0.2%), YM (-0.2%) are still relatively contained. State-side earnings today include the likes of UnitedHealth, Wells Fargo, Goldman Sachs, Morgan Stanley, and Citigroup. It’s also worth noting that due to the market holiday tomorrow, the monthly stock option expiries will be occurring today, with roughly USD 495bln of single stock derivatives and some USD 980bln of S&P 500-linked contracts, according to Bloomberg. Back to Europe, the FTSE 100 (-0.2%) is the modest regional laggard as some of the heavyweight miners and energy names pull back, and with more focus on Euro-bourses – which currently exhibit a relatively broad-based performance across the majors, whilst the periphery is somewhat less optimistic/more indecisive. The sectoral breakdown does not portray a particular theme and the breadth of the market is also narrow - with Chemical and Travel & Leisure at the top of the chart at Utilities and Telecoms on the other side of the spectrum. The latter is weighed on by Ericsson (-5%) post-earnings after missing on its adj. operating profit forecast, whilst it noted an impairment charge from its Russian exit and acknowledged that the Iraq investigations by the DoJ could lead to additional fines. In terms of other individual movers, Atlantia (+5.0%) cheers reports that Blackstone and Benettons have offered to acquire Atlantia for EUR 23/shr – a healthy premium to the prior closing price. Volkswagen (-1.5%) initially spiked higher as prelim Q1 metrics topped forecast, but shares later reversed course, with brand deliveries in March sliding 37% Y/Y. In terms of consumer sentiment, a survey conducted by Jefferies (over 2,000 consumers across UK, Germany, France, and Italy) suggested “they will have to sacrifice some or all of their discretionary spending and lower savings. Despite that, most plan to spend on holidays and, if need be, cut back on restaurants/pubs and entertainment.” The desk thus highlights six surprises “1) inflation is hitting consumer confidence; 2) one-third believe they will need to make substantial budget changes; 3) holidays are prioritised after a two-year hiatus; 4) restaurant/bar spend could suffer; 5) consumers will still spend 2.4 days p/w WFH; 6) grocers and home improvement sectors will continue to benefit.”

14 Apr 2022 - 10:20- EquitiesResearch Sheet- Source: Newsquawk