EUROPEAN EQUITY UPDATE: Once again, banking woes hit stocks

Analysis details (09:25)

• European equities (Stoxx 600 -1.2%) trade lower across the board with selling pressure having increased since the cash open; note, Stoxx 600 is on track to close the week out with gains of around 1.3%.


• Selling pressure in regional stocks has been focused within the banking sector with Deutsche Bank (-8%) a notable laggard with some desks citing a jump in the Co’s CDS prices. Additionally, there is attention on the early redemption of 2028 notes by Deutsche Bank, with Lloyds announcing similar action re. 2024; early redemption(s) which can perhaps be taken as a negative if we assume the justification is that the banks expect to see more dovishness/risk-off before the next fixed-to-fixed rate adjustment. Naturally, such a development will bring back concerns over whether contagion from recent global financial stability concerns could filter its way through the Eurozone. UBS (-5.5%) and Credit Suisse (-5.9%) are enduring another miserable session amid the banking news with company-specific updates for the Co. noting that both are reportedly among the banks facing a US Russian sanctions probe, whilst UBS was downgraded at Jefferies.


• From a macro perspective, the Eurozone March PMI data conformed to the picture painted by the French and German releases whereby manufacturing fell short of expectations, whilst services saw a notable beat, prompting the composite to come above the top end of the forecast range (EZ composite PMI 54.1 vs. Exp. 51.9). The accompanying report noted “The survey is consistent with GDP growth of 0.3% in the first quarter, accelerating to an equivalent rate of 0.5% in March alone”.


• Losses in Europe follow on from a downbeat APAC session in which Chinese bourses lagged peers after the PBoC drained liquidity and as participants digested domestic earnings releases.


• Stateside, US futures (ES -0.1%, NQ +0.2%, RTY flat) trade with little in the way of firm direction with the ES currently stuck below the 4k mark. Today’s US docket sees the release of US durables and flash PMI metrics, whilst the highlight on the speaker slate is FOMC non-voter Bullard who will be speaking on monetary policy. Note, given the end of the blackout period, today could see a slew of unscheduled Fed speak as policymakers look to refine their messaging following this week’s 25bps hike in the FFR.


• Equity sectors in Europe are mostly lower with the exception of minor gains for Food, Beverage & Tobacco and Healthcare. To the downside, as discussed above, the Banking sector is the standout laggard, whilst other losers include Energy, Autos, and Basic Resources. In terms of individual movers and beyond the banking sector, Tui (-6.8%) is enduring substantial losses after announcing a EUR 1.8bln capital increase.

24 Mar 2023 - 09:25- Fixed IncomeData- Source: Newsquawk