EUROPEAN EQUITY UPDATE: Stocks in Europe build on Monday’s gains

Analysis details (09:25)

• European equities (Eurostoxx 50 +1.5%) are extending on yesterday’s advances as reprieve continues to be granted from last week’s banking system concerns. The gains follow on from an upbeat APAC session which saw bourses close higher across the board with Japanese participants away from market on account of the Vernal Equinox holiday.


• Stateside, US equity futures (ES +0.4%, NQ +0.2%, RTY +0.4%) are also firmer but to a lesser extent than European peers with focus remaining on what steps can be taken to further bolster the US banking system. The latest reporting via Bloomberg suggests that US officials are examining ways to permit the FDIC to temporarily insure deposits beyond the current USD 250k cap on most accounts without the need for congressional approval. Looking ahead on the slate for the US session, Existing Home Sales data is due at 14:00GMT/10:00ET. However, focus will largely be looking ahead to tomorrow’s FOMC announcement whereby market pricing currently assigns a circa 81% chance of a 25bps hike in the FFR as policymakers need to weigh the inflation outlook against financial stability concerns.


• The latest BofA Fund Manager Survey revealed that investors view the top three largest tail risks as a systemic credit event, elevated inflation and hawkish central banks. BofA strategists believe that positioning suggests that a floor in the S&P 500 lies at 3800 and recommends selling rallies above 4100-4200. Elsewhere, analysts at Bernstein have cautioned that in the US, the link between the performance of value and bond yields has broken down with relative earnings momentum the main tactical driver of share prices. As such, strategists suggest that the value trade warrants caution.


• European Equity sectors are higher across the board with Banks the standout outperformer as the industry continues to cheer the dwindling contagion concerns after UBS (+3.9%) agreed to acquire Credit Suisse (-0.3%) over the weekend. The latest reporting over the deal notes that tens of thousands of jobs are at risk with Credit Suisse expected to bear the brunt of the job cuts, according to FT sources. Additionally, Moody's affirmed UBS' rating at A3; outlook revised to Negative from Stable and S&P revised UBS' outlook to negative from stable; rating A-.


• Elsewhere, other gaining sectors include Insurance, Energy and Retail, whilst Food, Beverage and Tobacco names lag peers. RWE (+1.9%) is a post-earnings gainer after strong FY results which saw the Co. announce it expects to increase its dividend to EUR 1/shr from EUR 0.90/shr. Finally, Thyssenkrupp (+4.7%) sits near the top of the Stoxx 600 following reports that the Co.’s workforce and parts of the management want to stop the sale of its steel business.

21 Mar 2023 - 09:25- Research Sheet- Source: Newsquawk