EUROPEAN EQUITY UPDATE: More bad news gives stocks Monday blues

Analysis details (09:49)

It has been a dour start to the session for European equities (Eurostoxx 50 -2.1%, Stoxx 600 -1.9%) as regional bourses extend losses seen at the end of last week on account of the hawkish ECB repricing and hot US inflation metrics. Selling pressure for Europe has also been a continuation of the price action in Asia whereby the region conformed to sentiment seen across global counterparts as well as reacting to the latest COVID updates from China which saw the Beijing district of Chaoyang launch mass COVID testing on June 13th-15th following a COVID outbreak cluster related to bars, whilst Shanghai re-imposed a ban on dine-in restaurant services in most districts. The expected improvement in the COVID situation in China had been a key driver of gains in late May and therefore, the latest developments, coupled with the potential need for tighter monetary policy from the Fed are placing notable pressure on global equity markets. US equity futures are enduring another session of heavy losses with the June e-mini S&P (-2.5%) taking out the 20th May contract low of 3807.5 to breach 3800 to the downside. In terms of desk views, Morgan Stanley strategist Wilson, whose bearish S&P 500 PT of 3,400 has recently been garnering much attention, argues that growth risks are still not fully priced in. In Europe, sectors are lower across the board with underperformance seen in Travel & Leisure with airline names hampered by ongoing disruptions which have prompted easyJet to cut its June flight schedule by 40 flights a day in a pre-emptive move. Tech is also getting hit hard on account of the unfavourable yield environment which has also acted on a drag stateside with the NQ down some 2.9% for the session after the cash market closed lower by 3.6% on Friday. Elsewhere, the latest updates from China have acted as a major headwind to luxury names with Richemont (-3.9%), Kering (-3.7%) and LVMH (-3.1%) notably lower. In terms of individual movers, Thales (+3.4%) sits at the top of the Stoxx 600 after being initiated with a buy rating at Goldman Sachs, whilst HSBC (+0.8%) has avoided a session of losses thus far on account of research carried out by shareholder Ping An that there are three possible options for dividing its APAC operation which would generate between USD 8.2-26.5bln of value.

13 Jun 2022 - 09:49- Fixed IncomeEconomic Commentary- Source: Newsquawk