EUROPEAN EQUITY UPDATE: Stocks eke out mild gains amid light newsflow

Analysis details (09:18)

• European equities (Eurostoxx 50 +0.2%) predominantly trade with marginal gains in what has thus far been a session lacking in fresh fundamental drivers. The handover from the APAC session was an inconclusive one with markets seemingly waiting for the next catalyst to deliver some directionality for stocks. The main story at the start of the week was the potential impact on inflation from higher oil prices following the surprise OPEC+ production reduction. However, many desks are instead focused on the softening demand outlook as highlighted by yesterday’s ISM Manufacturing release.


• US futures (ES -0.1%, NQ -0.2%, RTY -0.1%) trade slightly below neutral with the ES just about holding above the 4150 mark. Data releases for today’s session are on the light side and instead focus may fall on additional Fed speak with voters Cook and Mester and non-voter Collins all due on the docket. That said, traders will likely be waiting for Friday’s jobs report (the final one before the May meeting) to see what scope (if any) the FOMC has to pause its hiking cycle in the face of recent financial sector woes.


• In terms of desk views, JPM’s Kolanovic suggests that most of the inflows over the past two weeks were driven by systematic investors, short squeeze and a decline in VIX. Kolanovic adds that “any decline in yields is not a sign that the Fed is about to bring a punch bowl for tech stocks, in our view, but rather a sign that recession probability has increased”. Accordingly, JPM expects “a reversal in risk sentiment and the market re-testing last year’s low over the coming months”.


• Equity sectors in Europe are higher across the board (ex-Food, Beverage & Tobacco) with outperformance in Retail, Banking and Insurance names. Individual movers are also on the light side during today’s session with Investec (+2.9%) supported by reporting that the Co. is to merge its wealth and investment UK Unit with Rathbones, whilst Evotec (+2.3%) and Cellnex (+2.0%) have benefitted from positive broker moves.

04 Apr 2023 - 09:18- Research Sheet- Source: Newsquawk