EUROPEAN EQUITY UPDATE: Stocks bide time ahead of a Lagarde-Powell overlap

Analysis details (09:47)

Stocks in Europe trade with a directionless bias on ECB day after waning off best levels, and following a mixed APAC handover, which saw China underperform on COVID woes, whilst Wall Street rallied in yesterday’s session. China more recently said it encourages citizens to stay put during China National Day holidays (Oct 1st-7th) and to avoid travelling outside of their cities, with the Transport Ministry forecasting mid-Autumn travel to drop 32% Y/Y. From a European perspective, the focus will be on the ECB announcement, with consensus and market pricing leaning towards a 75bps hike amid the deterioration in the inflation environment (Full Newsquawk Preview available in the Research Suite), albeit the confab comes ahead of the EU energy meeting on Friday – which hopes to see an agreement on measures to aid consumer energy prices. Furthermore, it’s worth noting that ECB President Lagarde’s press conference (13:45BST/08:45EDT) will almost certainly overlap with a speech by Fed Chair Powell (14:10BST/09:10EDT) who is likely to reiterate his commentary from the Jackson Hole Economic Symposium ahead of next week’s pivotal CPI metric (a Newsquawk primer can be found here). US equity futures are portraying a similar tentativeness as their European counterparts, with the main contracts trading on either side of the flat mark but holding onto yesterday’s gains. Sectors in Europe are now mixed (vs mostly firmer at the open), with defensives making their way up the ranks. Retail sits as the standout laggard as AB Foods (-7%) slips following lower FY guidance Y/Y, whilst Atos (-15%) falls after a negative note by Goldman Sachs. On the flip side, European banks benefit from the yield environment as they gear up for an ECB hike. In M&A, Darktrace slumped 30% at the open amid reports Thoma Bravo does not intend to make an offer for the Co., whilst Caixabank (+2.2%) feels tailwinds from the Spanish state marginally upping its stake in the firm to 17.3% from 16.1%. Melrose (-2.5%) reversed the opening gains seen on reports the Co. plans to spin off the GKN automotive division which was acquired for GBP 8bln in 2018. Finally, Cineworld (+11%) filed for bankruptcy protection in the US.   

08 Sep 2022 - 09:47- Research Sheet- Source: Newsquawk