EUROPEAN EQUITY UPDATE: Stocks consolidate after yesterday’s inflation-induced global rout

Analysis details (09:44)

Equities in Europe trade mostly lower but off worst levels, but the sentiment remains dampened in the aftermath of US CPI which resulted in a bloodbath across global markets – with Fed pricing for a 100bps hike next week at around 40%, and WSJ's Timiraos yesterday flagged a Fed hike of at least 75bps. Meanwhile, Fed-watcher Tim Duy does not think the Fed will step up next week’s hike to 100bps but says next week’s 75bps may not be the last move of such magnitude, per his opinion. In terms of geopolitics, reports yesterday also suggested that the US is mulling a sanctions package against China in a bid to deter an invasion of Taiwan, whilst separate reports said Taiwan reportedly hosted dozens of lawmakers in Washington. This all comes ahead of the Shanghai Cooperation Organisation (SCO) meeting commencing tomorrow which will see a gathering of “anti-West” leaders including China and Russia (full Newsquawk primer available here.) This also comes against the backdrop of continued clashes between Armenia and Azerbaijan – the latter being a lifeline to Europe regarding gas supply. US equity futures consolidated overnight after yesterday’s detrimental losses, with a relatively broad-based gains performance seen across the main futures contract in the early European hours – with volumes having flipped to December ahead of quad witching this Friday. Sectors are mostly lower with no overarching theme – Retail, Autos & Parts, Banks, Travel & Leisure reside in the green at the time of writing. Tech consolidates after the yield-sensitive sector was amongst the hardest hit yesterday. The downside meanwhile sees Utilities, Basic Resources, Food & Beverages, and Telecoms. In terms of individual movers, the European Retail sector is bolstered by Inditex (+5.1%) amid better-than-expected earnings, while it targets online sales above 30% Y/Y. Elsewhere, Uniper (-7.0%) initially opened higher amid reports that the Co. is said to be mulling arbitration proceedings to claim billions of EUR in compensation from Gazprom, although shares then reversed as Germany is reportedly discussing the nationalisation of Uniper. Volkswagen (+2.0%) is firmer as the Porsche IPO is reportedly drawing commitment from Red Bull founder and Norway's Wealth fund, according to reports. Co. is seeking a valuation of EUR 70-85bln, according to Bloomberg sources. Deutsche Lufthansa (-2.5%) is pressured as Germany offloaded a 6.2% stake in the Co. with the listed price range between EUR 6.09 to EUR 6.15 (vs EUR 6.32 close on Tuesday), according to a term sheet.

14 Sep 2022 - 09:43- Research Sheet- Source: Newsquawk