EUROPEAN EQUITY UPDATE: Stocks fade post-PMI gains as focus turns to the NATO/G7/EC marathon

Analysis details (09:55)

Equities in Europe kicked off the session relatively flat but saw some brief impetus from above-forecast Flash PMI metrics from the EZ – with Germany and France spurring the initial upside which faded eventually (Euro Stoxx 50 +0.1%; Stoxx 600 +0.2%), whilst the commentary from Markit pointed to continued inflationary pressures, alongside Russia-Ukraine uncertainty. US equity futures experience slightly more pronounced gains vs their European counterparts – with the ES (+0.6%), NQ (+0.8%), RTY (+0.8%) and YM (+0.5%) all on the front foot with more Fed speakers on the slate. On the geopolitical front, traders look forward to the marathon of geopolitical meetings in the West whereby US President Biden will be joining European leaders during the first day of the European Council Summit. Defence and Security will be among the top topics and the date will mark one month since the war began. The meetings also come amid increasing violence inside Ukraine but closer to the Polish border – with the Ukrainian city of Lviv under fire last Friday – just over an hour’s drive from the border with NATO-member Poland. Western officials will likely continue to resist militarily offensive options whilst expressing solidarity with Ukraine and mulling over further sanctions, although some fear the West has exhausted a large part of its sanctions arsenal. The unity between the West will also be eyed (full Newsquawk primer and schedule available here). The European picture is now mixed with the laggard again consisting of the Austrian ATX (-0.7%) amid the ongoing woes surrounding Austria’s exposure to the crisis – whilst European peers are relatively contained on either side of the unchanged mark at the time of writing. In terms of analyst action, Barclays strategists have ended their seven-quarter long overweight call on global stocks vs bonds amid slowing earnings growth and valuation risks. “U.S. and European equities are unlikely to report sharply positive earnings surprises over the next few quarters as the effects of stimulus fade”, the analysts say. Meanwhile, SocGen strategists have reduced their equities allocation due to a “tougher Fed” – although reductions occurred in the US (20% vs prev. 25%), Europe ex-UK (5% vs prev. 7%), whilst the UK was maintained at 2%. Sectors in Europe are also mixed but now display a clear defensive theme, with Consumer Products, Food & Beverages, Utilities, Telecoms and Healthcare all in the green alongside Energy – the outperformer. The other end of the spectrum sees Retail, Banks, Tech and Media. In terms of individual movers, Telecom Italia (+6.4%) holds onto gains after KKR has reportedly reiterated its interest in Telecom Italia, according to Reuters source. Conversely, Glencore (-3.1%) is pressured as Qatar Sovereign Wealth Fund is selling its USD 1.1bln stake in the Co, with secondary guidance of GBP 4.97/shr according to separate reports.

24 Mar 2022 - 09:55- Fixed IncomeData- Source: Newsquawk