EUROPEAN EQUITY UPDATE: Stocks clamber off worst levels but hold a negative bias ahead of US CPI

Analysis details (10:20)

Equities in Europe kicked off Tuesday’s trade with notable losses from the start as the region played catch-up to the losses seen on Wall Street, although APAC markets saw a mixed close with Mainland China outperforming as the PBoC is expected to ease policy in Q2. However, sentiment during European trade remains tilted to the downside as Russia-Ukraine headlines comprise largely of chemical weapon fears as opposed to negotiation developments. Further, participants are looking ahead to the US CPI metric whereby the Biden administration has already said inflation will be elevated. US equity futures remain a downside bias but trade off worst levels at the time of writing - with the NQ (+0.1%) faring slightly better than the ES (Unch), RTY (Unch), and YM (Unch) despite the firming yields. On that note, the BofA April Investor Survey suggested global growth optimism is at an all-time low, with stagflation concerns at their highest since August 2008. The survey noted global recession is the top tail risk for markets followed by hawkish central banks, whilst the Russia-Ukraine conflict has dropped to the 4th biggest risk. More investors believe inflation will trend lower in the next 12-months, whilst long oil/commodities is the top most-crowded trade, according to BofA. Meanwhile, strategists at Blackrock, against the backdrop of inflation, favour equities in US and Japan over Europe but also expected the ECB to be more cautious about rate lift-off vs market expectations. Back to trade, Europe has trimmed losses but remains in the red (Euro Stoxx 50 -0.9%; Stoxx 600 -0.9%). Sectors are mostly lower but Energy is retaining its top spot as crude prices rebound, whilst Tech climbs up the ranks after yesterday’s underperformance. Similarly, Banks pull back after yesterday’s outperformance coupled with block share sales in Deutsche Bank (-9.0%) and Commerzbank (-7.8%) at discount by an undisclosed party. Overall, European sectors do not portray a particular theme. In terms of other individual movers: Rolls-Royce (-4.8%) and STMicroelectronics (-0.9%) saw broker downgrades, whilst airliners see headwinds from higher oil prices - easyJet (-1.3%) is softer despite the overall positive trading update, and Ryanair (-1.5%) fails to benefit from a broker upgrade.

12 Apr 2022 - 10:19- EquitiesData- Source: Newsquawk