EUROPEAN EQUITY UPDATE: Stocks build on Monday’s gains as US returns to the fray

Analysis details (09:30)

European equities (Eurostoxx 50 +1.3%) kicked the session off on the front foot and have continued to extend on gains since. The session follows on from a day of gains yesterday and a positive APAC handover which saw stocks in the region rise alongside a stabilisation in Chinese commodity prices and crypto markets. Fresh macro drivers for Europe have been relatively light thus far beyond ECB policymakers continuing to talk up their efforts to tame inflationary impulses and avoid fragmentation between core and peripheral spreads. Stateside, futures are trading on a particularly strong footing (ES +1.9%, NQ +2.2%, RYT +2.2%) as US participants return to the fray from the long weekend. In terms of desk views, Morgan Stanley's equity strategist Wilson is once again arguing that equities are not pricing in the prospects of a recession, and that the S&P 500 would need to fall to around 3,000 for this risk to be fully reflected. Meanwhile, analysts at Goldman Sachs were also talking recession risks over the weekend, noting that the near-term prospects of recession was pressuring stocks, and inflation would need to peak before equities can rally. GS is neutral on equities over a three-month window given the uncertainties. Sectors in Europe are predominantly firmer with Chemicals outpacing peers amid upside in BASF (+2.7%) which sits at the top of the DAX 40. Elsewhere, Basic Resources names are also posting solid gains amid upside in underlying commodity prices whilst other notable gainers include Consumer Products, Autos and Tech. To the downside, Utilities is the standout laggard with some of the region’s energy providers lagging on account of ongoing angst over gas supplies from Russia. In terms of individual movers, Ocado (-4.5%) sits near the foot of the Stoxx 600 after completing a GBP 575mln capital increase in a move to boost liquidity and fund growth. Finally, Leonardo (+6.4%) shares have been supported by news that its US electronics business DRY has struck an agreement for a takeover of RADA. 

21 Jun 2022 - 09:29- EquitiesImportant- Source: Newsquawk