EUROPEAN EQUITY UPDATE: Stocks gain in early-trade on positive Russia-Ukraine vibes, but eye a slew of risk events

Analysis details (09:23)

European equities kick the week off on a mostly firmer footing as Euro-bourses outpace peers, with the DAX 40 (+1.6%) spearheading the gains in early trade (Euro Stoxx 50 +0.7%; Stoxx 600 +0.8%). The mood is different from the downbeat tone seen in APAC as Chinese markets tackled the sudden imposition of stricter COVID measures in several major cities – whilst Europe looks to the Russia-Ukraine meeting for some impetus. The meeting was scheduled for 08:30GMT/04:30EDT and comes after Russian and Ukrainian officials on Sunday gave their most upbeat assessments so far on the progress of talks and suggested there could be positive results within days. That being said, the weekend Russian strikes of a training facility near the border with Poland provides some concerns. US equity futures are firmer but to a slightly lesser extent than their EUR counterparts, but the contracts count down to the March FOMC meeting on Wednesday after Fed Chair Powell endorsed a 25bps rate hike at the recent semi-annual testimonies, but suggested that the Fed would be cautious amid the Ukraine conflict. Before that, the US and China will be conducting a high-level meeting today whereby Russia-Ukraine will take the spotlight – no major constructive development is expected from this meeting. Back to Europe, the FTSE 100 (+0.2%) sits with shallower gains as the index also eyes a 25bps hike by the BoE on Thursday and with caution likely to be expressed regarding inflation. Nonetheless, analysts at Morgan Stanley favour UK stocks amid their value and defensive credentials against the current geopolitical and inflationary backdrop. The “U.K. has benefited from a style rotation, defensive leadership, and strength in commodity markets, but still, look cheap vs history”, MS strategists say, “Germany and Italy are severely oversold, with a good deal of EPS degradation now likely priced in”. The laggard in Europe this morning is the Dutch AEX (-0.4%) as Prosus (-10%) weighs on the index following recent news of its Russia-related hit. Sectors in Europe are mostly firmer with Autos & Parts. Banks and Retail among the top performers. Autos are bolstered by Volkswagen (+6%) post-earnings following stellar metrics and an increase in its dividend, whilst the performance across banks also lift the Spanish IBEX (+1.7%) and Italian FTSE MIB (+1.9%) in tandem. Meanwhile, the other side of the spectrum sees some of the more defensive sectors – Healthcare, Food & Beverages, Consumer Products – sit at the foot of the bunch alongside Energy. In terms of individual movers, Deutsche Bank (+6.0%) cheers an update which noted that there won't be any new business in Russia and the bank is in the process of winding down remaining business in the country. EDF (-1.6%) is pressured after highlighting a deeper-than-expected balance sheet impact from regulatory developments and output cuts. Sticking with nuclear, Rolls-Royce (+3.2%) is firmer as UK ministers are said to be pushing the Co. to deploy its mini-nuclear reactors faster than planned in order to speed up the unwind in Russian energy reliance. Finally, Sanofi (-5.0%) is hit after its AMEERA-3 trial did not meet the primary endpoint of improving progression-free survival.

14 Mar 2022 - 09:23- EquitiesResearch Sheet- Source: Newsquawk