EUROPEAN EQUITY UPDATE: Stocks pick up where they left off on Friday

Analysis details (09:25)

European equities (Eurostoxx 50 +0.5%) have resumed the week on the front-foot after a solid showing on Friday with incremental macro updates (other than hawkish rhetoric from ECB President Lagarde) on the light side. The handover from the APAC session was mostly constructive, albeit gains were capped for Chinese equities following underwhelming growth forecasts set by Chinese officials over the weekend. US equity futures (ES, NQ and RTY all flat) are closer to neutral than their European counterparts as traders continue to weigh the likely policy path which is to be laid out by the FOMC. Today’s docket is benign, but traders will be eying testimonies from Fed Chair Powell on Tuesday and Wednesday – one of his last opportunities to set the policy narrative ahead of the blackout that kicks in at the end of this week before the March 22nd FOMC. Elsewhere, the jobs data on Friday will be a piece of this debate, and we will get the usual preview by way of ADP’s data on Wednesday. In terms of desk views, MS strategists have been unimpressed with the recent corporate earnings season: “because US stocks rallied during the reporting season, Q4 earnings have generally been described as decent, but the actual numbers don’t look great”. MS notes, from a technical perspective, there is both bullish and bearish factors in play, but the strong gains seen on Friday could potentially extend the rally in the near-term; the bank identifies resistance at 4,150 in the S&P 500, but longer-term are still cautious, arguing that US earnings expectations remain too high. Sectors in Europe are mostly firmer with Travel & Leisure top of the leaderboard with Deutsche Lufthansa (+3.2%) a notable gainer in the sector after being reiterated overweight at JP Morgan Chase and upgraded as HSBC. To the downside, Basic Resource names are the clear laggard following the Chinese-induced downside to the metals complex which has sent the likes of Anglo American (-3.1%), Rio Tinto (-2.6%), Antofagasta (-2.3%) and Glencore (-1.9%) to the foot of the FTSE 100. Elsewhere, Telecom Italia (-3.2%) is one of the best performers in the region after Italian state lender CDP said its board had approved a non-binding offer for the Co.’s fixed-line network. Rheinmetall (+2%) shares are cheering news that it will enter the DAX 40 on March 20th, whilst Accor (+1.8%) and Kingfisher (+1.3%) have been supported by broker upgrades. To the downside, albeit off worst levels, Credit Suisse (-0.6%) shares have been hampered by news that Harris Associates, which owned as much as 10% of the Co. in 2022, began cutting its exposure in October and has now divested completely, according to the FT.

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