EUROPEAN EQUITY UPDATE: Stocks drift lower in quiet trade

Analysis details (09:25)

• European equities (Eurostoxx 50 -0.3%) trade with marginal losses with stocks drifting lower after the cash open. Incremental drivers have been lacking asides from some attention placed on soft industrial output data from Germany which saw ING conclude that “without any significant pick up in activity, the German economy's recession could continue in the second quarter”. Asides from data and hawkish reiterations from ECB’s Schnabel, macro drivers for the region are somewhat lacking ahead of next week’s widely-expected 25bps hike from the ECB.


• APAC stocks traded mixed despite Wall Street's positive performance. Chinese trade data was weaker than forecast and showed a wider-than-expected contraction in exports, limiting gains. Aussie shares were lower alongside weak Australian GDP. Japan's Nikkei 225 was the regional laggard with losses of 1.8%.


• US equity futures are trading with slight losses (ES -0.2%, NQ -0.3%, RTY -0.1%) with the ES retreating further away from the 4300 mark after venturing as high as 4305.75 on Monday. For US traders, next week's FOMC and CPI remain the near-term catalysts, but before then, a BoC meeting today will be eyed to see if the central bank's 'conditional pause' is jettisoned after strong data signals potential further inflation upside.


• Analysts at Barclays notes that stocks may continue to “muddle through” while a US recession remains at bay, helped by resilient earnings, stabilising yields and cautious positioning. However, the desk notes that “amid late-cycle dynamics, everything is up in the air” and therefore less beta exposure makes sense. That said, a “high price for safety” is stopping Barclays from getting more defensive.


• Equity sectors in Europe are mostly softer with Chemicals and Insurance names bottom of the pile, whilst the Retail sector is the marked outperformer with gains in excess of 2%. Retail names have been bolstered by shares in Inditex (+5.9%) after the Spanish heavyweight reported solid Q1 results. Elsewhere, Danske Bank (+5.2%) is one of the best performers in the Stoxx 600 after unveiling its FY26 targets and announcing its intention to resume dividend payments. Vodafone (+2.9%) shares have been bolstered by reporting from Reuters that the Co. and Hutchinson are to announce an agreed merger of their UK operations as soon as Friday/early next week. Elsewhere in M&A activity, Harbour Energy (+4.5%) is reportedly in discussions to combine with Talos Energy, according to Reuters citing sources. Finally, Hugo Boss (+3.8%) shares have benefitted from an initiation with a buy rating at UBS.

07 Jun 2023 - 09:25- Fixed IncomeData- Source: Newsquawk