EUROPEAN EQUITY UPDATE: Sentiment wanes on hot UK CPI, but ranges are contained pre-FOMC

Analysis details (08:50)

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  Sentiment has tilted lower since APAC took the cue from Wall Street’s rally as much hotter-than-expected UK CPI across the board ignited a hawkish repricing and has now cemented a 25bps hike by the BoE on Thursday (vs ~40% chance of a hold pre-release). Before that, the FOMC announcement and presser will be taking place today (an hour earlier in Europe due to the recent US clock change), with expectations largely tilting towards a 25bps increase, although recent financial stability concerns have raised some anxieties surrounding the health of the banking sector (Full Newsquawk preview available in the Research Suite). Equity futures held onto the prior day’s spoils overnight before waning from highs and extending on losses ahead of the cash open, albeit price action is cagey in pre-FOMC ranges (ES -0.2%, NQ -0.3%, YM -0.2%, RTY -0.2%).


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  Over in Europe, the region kicked off trade with a downward bias, with current losses modest (Euro Stoxx 50 -0.2%; Stoxx 600 -0.1%) after the Euro Stoxx 50 future trimmed pre-UK CPI gains of some 0.2%. The FTSE 100 (-0.3%) narrowly lags as the BoE gears up for its March confab, with cash and futures both just above the 7,500, although the latter briefly dipped under the psychological mark earlier. Sectors in Europe are mixed with no clear bias, as Retail, Media, Food & Beverages lead the modest gains, while Real Estate and Telecoms see the deepest losses. In terms of some individual movers, Marks & Spencer (+3.5%) and Ubisoft (+3.4%) are propped by broker upgrades. Adidas (-1.2%) and Puma (-0.9%) are pressured by Nike (-1.6% pre-market) post-earnings. Generali (-0.3%) is reportedly interested in acquiring Liberty Seguros, valued at over EUR 1bln. Telecom Italia (-0.2%) reaches an agreement with unions regarding 2,000 job cuts via early retirement.


• The BofA March Global Fund Manager Survey (dated 21st March) reveals investor sentiment nearing pessimistic levels observed during the lows of the past 20 years. The survey indicates that 51% of respondents expect weaker global growth, 84% believe inflation will decrease, and 88% anticipate stagflation as the most likely macro regime in the next 12 months. The BofA Financial Market Risk Indicator has risen to 7.7 due to increasing credit and counterparty risks, with cash levels at 5.5%. Investors foresee the Fed funds peak at 5.25-5.5%, with 60% predicting lower short rates in the next 12 months. Asset allocators are long on cash and commodities while being short on stocks, with a significant preference for large-cap and quality assets over small-cap and junk assets. Contrarian trades include a bullish end to the regional bank run and a deep bearish credit crunch, with short positions on commodities, emerging markets, and the EU.

22 Mar 2023 - 08:50- Research Sheet- Source: Newsquawk