EUROPEAN EQUITY UPDATE: stocks extend on Wednesday's gains with the FTSE 100 largely unfazed by political turmoil

Analysis details (09:41)

European equities (Eurostoxx 50 +1.6%) have been able to extend on yesterday’s advances with not much in the way of fresh fundamentals driving price action beyond an upbeat APAC session overnight. A lot of focus today has fallen upon UK markets amid the expected resignation of UK PM Johnson with the FTSE 100 (+1.1%) trading marginally softer vs. peers amid a pick-up in the pound. From a policy perspective, Capital Economics suggests that “we think that headwinds from rising interest rates and weakening economic growth will be a nasty combination for the FTSE 100, which we expect to drop by another 3% or so this year”. Stateside, futures are firmer but to a lesser extent than European peers (ES +0.4%, NQ +0.5%, RTY +0.5%) with yesterday’s FOMC minutes doing little to shift the dial when it comes to shaping FFR expectations as markets await Friday’s NFP and next week’s CPI metrics whilst US earnings season kicks off in earnest next week. Sectors in Europe are mostly higher with the exception of Travel & Leisure which is being hampered by losses in Entain (-5.8%) after the Co. noted that the weaker macro environment is reducing customers rate of spend alongside H1 results. To the upside, Auto names are positing an exceptionally strong performance thus far, followed by Basic Resources, Banks and Energy. Of note for the latter, a strategist at JP Morgan suggests that the outlook for the sector remains positive with the sell-off in energy overdone. Elsewhere, prelim Q2 results from Samsung have proven to be supportive for chip names within the region. In terms of individual movers, Drax (+6.7%) sits at the top of the Stoxx after agreeing to extend the lift of coal-fired power units over the winter, whilst Tenaris (+6.2%) has been supported by a broker upgrade at Jefferies. To the downside, Persimmon (-4.5%) is softer on the session after cautioning that completions have been hampered by supply chain disruptions and labour shortages. 

07 Jul 2022 - 09:39- EquitiesData- Source: Newsquawk