EUROPEAN EQUITY UPDATE: Stocks inch higher in early European trade

Analysis details (09:25)

• European equities (Eurostoxx 50 +0.3%) are trading mostly higher in what has been a slow start to the week for regional newsflow. Further ECB speak hit over the weekend with ECB's Kazmir leaning back against some of the more dovish chatter in recent days, stating that the central bank would need to raise rates for longer than previously thought in order to cap inflation. However, it is worth noting that comments from officials are having minimal impact on the tape at this stage.


• Asia-Pac stocks traded mixed following the subdued performance last Friday on Wall St where risk sentiment was hampered by a disappointing University of Michigan Survey and US debt ceiling concerns, while participants in the region brace for this week’s key economic releases including the latest Chinese activity data.


• US equity futures are a little higher (ES +0.4%, NQ +0.2% and RTY +0.6%) with the ES sitting just above the 4150 mark. Debt ceiling drama continues to linger, but President Biden says we should see progress in the next few days, with reports suggesting a meeting with Congressional leaders will take place on Tuesday, ahead of Biden’s visit to Japan. The week ahead has a retail feel, with US retail sales data for April out on Tuesday, while we also get earnings updates from Walmart (WMT), Home Depot (HD) and Target (TGT), which could provide further sway into the economic growth narrative. 


• Morgan Stanley strategists note that its clients are more optimistic than itself when it comes to the 2023 earnings outlook, with the former expecting a S&P 500 EPS of circa USD 215 vs. the Bank’s view of USD 195. MS says its clients expect the index to trade in a 3800-4200 range in the near-term, however, conviction levels are not high given the uncertain macro backdrop and elevated valuations. The debt ceiling was cited by clients as a key risk to markets this year, however, it is expected to be resolved after some volatility in the near-term.


• Equity sectors in Europe are mostly firmer with upside in Consumer Products & Services, Insurance and Basic Resources, whilst Chemicals and Real Estate names narrowly lag. 


• In terms of individual movers, BBVA (-3.2%) is one of the worst performers in the Stoxx 600 and acting as a drag on the IBEX 35 (-0.1%) given the Co.’s exposure to Turkey (follows inconclusive Turkish election results over the weekend). Elsewhere, Valeo (+3.6%) is enjoying a session of gains following a broker upgrade at Kepler Cheuvreux, whilst Siemens Energy (+2.9%) shares have been supported post-earnings. Finally, Wood Group (-33.8%) shares are markedly lower this morning after news that Apollo does not intend to make an offer for the Co.

15 May 2023 - 09:25- EquitiesEU Research- Source: Newsquawk