EUROPEAN EQUITY UPDATE: Stocks glum as SNB pulls the trigger on an unexpected hike

Analysis details (09:45)

Upside in European equity futures ahead of the cash open was short lived with stocks in the region trading lower across the board (Eurostoxx 50 -1.8%). There was no obvious catalyst for the initial downside, however, equities were then dealt a further blow after the unexpected decision by the SNB to raise rates by 50bps from -0.75% to -0.25% with the Bank unable to rule out further increases. The move by the SNB has continued to underline the theme seen in recent weeks that central banks are continuing to get more aggressive in their approaches in an attempt to return inflation back to target; a strategy which continues to raise questions about the short-term growth outlook. The European session followed on from a mixed APAC lead which saw stocks in Hong Kong lag peers amid underperformance in property names. Stateside, futures have also succumbed to the selling pressure with the e-mini S&P (-1.8%) erasing all of yesterday’s FOMC-inspired gains and breaching yesterday’s low of 3723.5 for the Sep’22 contract, whilst the NQ lags the majors with losses of 2.1%. Sectors in Europe are lower across the board with underperformance observed in the retail sector following an update from Asos (-23.5%) which saw the Co. warn that inflationary pressure is increasingly impacting customer shopping behaviour. Furthermore, BooHoo (-13.2%) are also seen lower on the session after its Q1 trading update revealed a decline in sales. In sympathy, Zalando (-10.8%) sits at the foot of the Stoxx 600. Elsewhere, Tech names are seen lower after outperformance seen during yesterday’s session with the sector struggling to contend with the increasingly unfavourable yield environment. Underperformance can also be observed in Chemicals, Travel & Leisure and Consumer Products. In terms of individual movers, THG (-15%) is enduring a session of heavy losses after noting that all recent approaches for the Co. were unacceptable and undervalued the Co. As such it will not seek an extension to its takeover deadline. Elsewhere, further misery has been placed upon Atos (-6.7%) shareholders following the Co.’s strategy update earlier in the week. To the upside, Euronext (+2.8%) is one of the better performers in the region after being upgraded to overweight from neutral at JP Morgan.

16 Jun 2022 - 09:43- EquitiesImportant- Source: Newsquawk