EUROPEAN EQUITY UPDATE: Stocks nurse earlier losses in a post-PMI bounce

Analysis details (10:22)

Equities in Europe have reversed the losses seen at the open following mostly mixed Flash PMIs from the EZ and UK, with the overarching theme being contracting growth in the EZ alongside less intense price pressures in the region – with participants ultimately on the lookout for when central banks can take the foot off the hiking pedal. That being said, the rise in energy prices – i.e. German power prices hitting fresh highs – and strong domestic price pressures, will likely keep inflation elevated, a view shared by CapEco economists. Stateside, US equity futures have nursed earlier losses in lockstep with their European counterparts, with a modest and broad-based upside seen across the most liquid contracts. “We maintain that inflation will resolve on its own as distortions fade, and likely drive a Fed pivot, while a stronger H2 recovery in China should provide support for the global cycle”, said JPM’s Kolanovic in a note dated yesterday. Back in Europe, the region now sees an overall mixed picture (Euro Stoxx 50 +0.2%; Stoxx 600 -0.1%). Sectors are also mixed but with more of an anti-defensive bias – with Healthcare, Personal Goods, Foods & Beverages, Telecoms, and Utilities at the bottom of the pack, whilst Basic Resources and Energy lead the gains. Interesting individual movers today are relatively sparse: IAG's (-0.6%) British Airways will make further flight cancellations up to the end of October, while winter capacity will be lower too. Elsewhere, Renault (+0.7%) and Stellantis' (+0.5%) French car plants will resume production after closing for the annual summer break. In materials, Antofagasta’s (+0.6%) subsidiary sued the Biden administration over the cancellation of Minnesota mining leases. In telecoms, BT (+1.7%) said the UK was to take no action on its Altice stake increase.

23 Aug 2022 - 10:22- EquitiesResearch Sheet- Source: Newsquawk