EUROPEAN EQUITY UPDATE: Stocks hold an upward bias on Quad-Witching Friday

Analysis details (08:55)

• Equities in Europe kicked off Quad-Witching Friday on a firmer footing, and marginally extended on opening gains as global risk appetite was lifted by global banking support after the SNB gave a lifeline to Credit Suisse and 11 large US banks teamed up to help First Republic Bank with a deposit of USD 30bln. The banking relief lifted US stocks yesterday, with the Nasdaq posting gains of 2.5% as the tech sector led the gains, while defensives lagged. This sentiment reverberated into APAC markets; ASX 200 rose marginally due to energy and financial sector performance, while Nikkei 225 crossed the 27,000 mark with railway stocks leading gains. Hang Seng and Shanghai Comp. were positive, driven by energy, tech, and PBoC's continued liquidity efforts. US equity (June) futures hold a mild upward bias (ES +0.3, NQ +0.1%, RTY +0.3% and YM +0.1%).


• In Europe, major bourses are heading higher (Euro Stoxx 50 +1.3%; Stoxx 600 +1.1%) as risk appetite remains buoyed with hopes of a banking crisis being averted whilst Central Banks could have the propensity to tread less hawkishly amid fears of adverse effects on financial stability. On that note, the ECB convened an ad-hoc supervisory board meeting today to review developments in the banking sector following market turmoil, according to a spokesperson cited by Reuters. The banking sector, SX7P +1.2%, is among the top performers with Credit Suisse (Unch.) holding above the CHF 2 level, with upside capped by reports the bank is being sued by shareholders in the US over a failure to disclose material weakness in internal controls and significant Q4 outflows. Elsewhere, Bloomberg reported that Credit Suisse and UBS (+1.4%) are opposed to the idea of a forced combination. Back to sectors, Energy and Basic Resources lead the gains amid upward price action across commodities as the Dollar remains soft and risk is buoyed. Sectors are firmer across the board but laggards wholly consist of defensive sectors at the time of writing.


• In terms of other individual stories, Casino (+2.0%) raises ~USD 770mln through a stake sale in Assai. Deutsche Bank (+3.2%) reported EUR 10.2bln total compensation, +3% Y/Y, and proposes EUR 0.30/share dividend. Postal names (Deutsch Post +2.4%, PostNL +3.0%) are lifted as FedEx raised its FY adj. EPS forecast. Enel (+1.7%) is to launch EUR 2.2bln buyback program in 2023. Novartis (Unch) received FDA approval for Tafinlar + Mekinist pediatric treatment. Rio Tinto (+2.7%) spent over AUD 15.3bln with Australian suppliers in 2022, +9% Y/Y, and Volkswagen (-0.5%) plans investment in mines to reduce battery cell costs.


• Looking at some commentary, BofA strategists suggest selling any stocks rally due to lack of equity capitulation and excessive greed for rate cuts, whilst in terms of the weekly flow show, the US saw inflows of USD 2.8bln, Europe saw outflows of USD 1.4bln, Japan experienced outflows of USD 400mln, and EM clocked outflows of USD 66mln. Bofa suggested if equity outflows had paced with redemptions seen during Covid or Lehman bankruptcy, they should have amounted to USD 40-50bln.

17 Mar 2023 - 08:55- Research Sheet- Source: Newsquawk