EUROPEAN EQUITY UPDATE: Stocks flat as PMIs fail to inspire direction

Analysis details (09:40)

• European equities have opened flat/mixed (Stoxx 600 -0.1%) with the Stoxx 600 virtually on track to close the week out where it started. Flash PMI data released this morning showed Eurozone, German and French manufacturing underperforming expectations in April, although the services and composite indices were better than expected. Markets reacted hawkishly given some of the commentary within the release alluded to dogged inflation pressures, and that will likely keep the ECB on course to tighten policy in its upcoming meetings. Meanwhile, UK retail sales declined by 0.9% M/M in March (exp. -0.5%, prev. +1.1%).


• The overnight APAC session saw stocks mostly lower, tracking the losses on Wall Street. Chinese shares underperformed amid ongoing US-China frictions, and as President Biden is to unveil China investment curbs prior to the G7 summit in May, while Treasury Secretary Yellen said national security may come at a cost in the US-China relationship.


• US equity futures are lower (ES -0.1%, NQ -0.1%, RTY -0.1%) with the caution in recent sessions a function of some disappointing corporate earnings reports, softer economic data, as well as hawkish monetary policy commentary from Fed officials, who seem intent on continuing rate hikes to manage price pressures. Note, Fed officials will go into blackout at the end of this week, ahead of the May 3rd policy meeting. Today's S&P Global Flash PMI data will help provide some clarity after this week's mixed Empire Fed (upside surprise) and Philly Fed (downside surprise); regional metrics which help to shape expectations of how the more widely followed ISM data will look when it is released in early May.


• Equity sectors in Europe are mixed with marked underperformance in Basic Resource names alongside the price action in underlying commodities as well as production updates from BHP and Glencore (-1.8%). To the upside, Health Care and Utilities lead peers with breadth across the market otherwise on the light side. EssilorLuxottica (+5.2%) sits at the top of the Stoxx 600 following Q1 results which saw the Co. beat on revenues and talk up its performance in China, whilst Mercedes-Benz Group is another post-earnings gainer following well received prelim Q1 earnings. After a soft open, SAP (+0.6%) shares have reversed course after pre-market earnings showed a beat on the top line but a miss on the bottom line. Finally, Salvatore Ferragamo (-5.7%) is a notable laggard on the session after Q1 revenues missed expectations.

21 Apr 2023 - 09:40- Fixed IncomeData- Source: Newsquawk