EUROPEAN EQUITY UPDATE: Stocks buoyed as Senate sends debt ceiling bill to Biden

Analysis details (09:14)

• European equities (Stoxx 600 +0.6%) trade on the front foot following the Senate passage of the debt ceiling bill, which will now be sent to President Biden’s desk. Despite the positivity during today’s session, the negativity earlier in the week means that the Stoxx 600 is on track to close the week out with losses of around 0.8%.


• Overnight, APAC stocks rose, following Wall St's gains on debt ceiling optimism, as well as dovish Fed comments; Harker suggested that the Fed was closer to a pause, while Bullard reiterated that policy was now at the low end of 'sufficiently restrictive'. ASX 200 climbed with mining sector strength, but financials limited gains. Nikkei 225 received support from BoJ's dovish stance. Hang Seng and Shanghai Comp. outperformed amid a rally in the property and tech sectors. 


• US futures (ES +0.3%, NQ +0.3%, RTY +0.4%) are trading firmer but to a lesser extent than European peers as the latter plays catch up to gains in US cash markets yesterday. Today’s jobs data is the key catalyst whereby the consensus expects 190k after the 253k in April, while wages are seen rising 0.3% M/M (from 0.5%), though the annual measure is seen unchanged at 4.4%. A recent report from the WSJ suggested that it would take a blowout report for the Fed to hike in June. NOTE: The Fed goes into blackout at the end of this week ahead of its June 14th policy meeting. 


• The latest BofA flow show noted that equity funds in the week through May 31st saw their largest inflow since February at USD 14.8bln with the regional breakdown showing that US stock funds experienced their first inflow in seven weeks, whilst Japan and Europe saw outflows (12th consecutive week for Europe). Furthermore, Tech stocks recorded the largest inflow ever at USD 8.5bln, whilst strategists note that despite being bearish and "wrong", investors are not keen to fade the S&P 500 at 4,200.


• Equity sectors in Europe are higher across the board (ex-healthcare) with Real Estate names top of the leaderboard followed by Basic Resources and Consumer Products & Services. Gains in the latter have been aided by upside in luxury names such as LVMH (+2%), Richemont (+1.7%) and Kering (+1.6%) following the strong performance of some of the group’s Asian peers overnight. Elsewhere, Puma (+4.1%) and Adidas (+3.2%) shares have been boosted by earnings from Lululemon who are some 13.9% higher in pre-market trade. Finally, Dechra Pharmaceuticals (+8%) shares have been boosted by news that EQT has made an offer for the Co. at GBP 38.75/shr (vs Thursday's GBP 33.74/shr close) in a deal valued at GBP 4.8bln (vs previously guided GBP 4.6bln). 

02 Jun 2023 - 09:13- Research Sheet- Source: Newsquawk