EUROPEAN EQUITY UPDATE: Risk-off resumes amid COVID concerns with ZEW ahead

Analysis details (09:45)

European bourses commenced the session on the back foot, Euro Stoxx 50 -0.5%, with broad-based losses after a downbeat lead from futures and in-fitting with the general tone of the APAC session, where COVID concerns remain a focal point after China’s Wugang, a key steel/iron hub, enters a short lockdown after just a single case; the underpinning factors include the energy situation amid pipeline maintenance, as well as familiar recession fears. Sectors are predominately in the red with IT underperforming once more, while energy is the outperformer on the back of pronounced EDF (+5.0%) after nationalisation reports, and despite prices for benchmark crude contracts. In the immediacy, attention turns to the German and Eurozone ZEW metrics for July, which are expected to decline further; recall, commentary alongside the June release highlighted a reduction in the China assessment due to COVID restrictions. While today’s release will not incorporate the most recent developments on that front, this assessment will come under heightened scrutiny in the months ahead given the recent negative developments – particularly as Wugang is an important metals hub. Further out, the docket thins after the cash close, where Fed speakers will feature. As such, in hours developments will likely continue to be driven on the long in-focus, and mentioned, factors of China/COVID, recession and energy barring any other significant geopolitical development, or similar. For reference, individual movers this morning are largely driven by broker activity while BASF, +0.2%, is relatively contained despite strong Q2 numbers and JPM reiterating their overweight stance; perhaps as the chemical giant caveats guidance for the FY is only maintained for now and that much of Q2 performance was price driven.

12 Jul 2022 - 09:45- EnergyResearch Sheet- Source: Newsquawk