EUROPEAN EQUITY UPDATE: Sticky CPI hits UK homebuilders

Analysis details (09:40)

• European equities (Eurostoxx 50 -0.1%) trade with little in the way of firm direction with the main macro story of the session thus far coming via UK inflation metrics. Once again, CPI in the UK overshot expectations with data for May seeing the Y/Y headline rate hold steady at 8.7% vs. consensus 8.4% (MPC expected 8.3%), whilst core Y/Y advanced to 7.1% from 6.8%. This has prompted a more aggressive rate path for the UK with increasing odds (but not a base case) of a 50bps move at tomorrow’s meeting and a total of 150bps of tightening priced in by March next year. The combination of uncontrolled inflation and a BoE which will need to keep their foot on the tightening pedal has overshadowed the better-than-expected start to the year for the UK economy but hasn’t (at the time of writing) had an impact on the broader tape. Looking ahead, guidance from an ECB perspective might be provided today via comments from Germany’s Nagel and Schnabel.


• APAC stocks were mostly subdued following the negative handover from Wall St. ASX 200 was dragged lower by weakness in the commodity-related sectors and with the mood not helped by the deterioration in the Australian Westpac Leading Index. Nikkei 225 (+0.6%) was initially pressured but then clawed back losses with SoftBank among the biggest gainers during its AGM where CEO Son noted that AI is about to grow explosively, while there were also comments from BoJ’s Adachi who stuck to the dovish script. Hang Seng (-2.0%) and Shanghai Comp. (-1.3%) were lower with Hong Kong underperforming on tech losses and as sentiment in the mainland remained dampened by the weaker growth outlook.


• US equity futures (ES -0.1%, NQ -0.1%, RTY +0.1%) trade in close proximity to the unchanged mark with the ES holding below the 4450 mark after yesterday’s selling pressure. Incremental macro updates for the US have been lacking overnight with traders looking to see if yesterday’s selling was a consolidation from recent gains or the beginning of a more pronounced pullback. Focus for today’s session will be on Fed Chair Powell who will be speaking at the House Financial Services Committee at 15:00BST/10:00EDT and is not expected to materially deviate from his comments at the FOMC press conference last Wednesday.


• Equity sectors in Europe have a slight negative bias with Real Estate names lagging peers as UK homebuilders suffer post-UK CPI; Barratt Developments (-3.5%), Persimmon (-3.2%), Taylor Wimpey (-2.8%). Elsewhere, Basic Resource names are also on the backfoot whilst Autos & Parts, Banking and Energy names comprise the session’s outperformers. Upside has not been seen across all of the Banking sector with UK banks Lloyds (-1.2%), Natwest (-1.6%) and Metro Bank (-2.2%) dragged lower by negative broker moves at BNP Paribas. On the flip side, Adidas (+3.2%) is one of the best performing stocks in the Stoxx 600 after a broker upgrade at UBS. Pandora (+2.1%) has been supported after initiating a new DKK 2.6bln share buyback which could reach up to DKK 5.0bln in total. Finally, troubled THG Group (+2.8%) shares are seeing some reprieve after maintaining FY 23 guidance and noting that margins will benefit further in the second half of the year.

21 Jun 2023 - 09:39- EquitiesData- Source: Newsquawk