EUROPEAN EQUITY UPDATE: Stocks resurrected after the Easter break

Analysis details (09:20)

• European equities (Eurostoxx 50 +0.5%) trade on the front foot as traders return from the long weekend and react to Friday’s NFP print which has been viewed by some as downplaying concerns of a hard landing. As has been the case for several trading sessions, incremental macro drivers for Europe have been lacking and as such may need to derive impetus from elsewhere. 


• The handover from the APAC region was a mostly constructive one with the ASX propped up by mining names and the Nikkei 225 bolstered by a softer JPY. 


• US equity futures are mostly only slightly better than flat given US markets were open on Monday, and other markets appear to be playing catch-up. Encouragement was taken yesterday from data showing that emergency dollar borrowings are beginning to slow. Looking ahead, traders await this week's key catalysts, by way of CPI data, FOMC minutes and retail sales. As it stands, market pricing now has a 25bps rate hike from the FOMC as its base case and bets for rate cuts further out this year have pared post-payrolls. Today, 2023 voters Goolsbee and Harker are due to speak in the afternoon. 


• In terms of desk views, JP Morgan says it believes the tech sector will trade “better than last year, relative to the market, but think that its absolute run is becoming stretched”. JPM adds that “In general, we believe that positioning in pure Defensive plays – where we have recently advised to add to them – such as Telecoms, Utilities, Staples and Healthcare, could be the best place to be over the next months”. 


• Equity sectors are mostly firmer with Basic Resources the standout outperformer, followed by Autos and Retail, whilst Food, Beverage and Tobacco names lag to the downside amid losses in constituents Nestle (-1.1%), AB Inbev (-1.7%) and Carlsberg (-1.7%). 


• In terms of individual updates, HelloFresh (+4.0%) is one of the better performers in the Stoxx 600 after an upgrade at JP Morgan, whilst broker action has also proved supportive for Smith & Nephew (+2%), Persimmon (+1.4%) and Accor (+1.9%). Elsewhere, Glencore (+2.7%) has been supported by the broad strength in the mining sector, however, newsflow for the Co. has continued to centre on its unsolicited bid for Teck Resources which continues to brand its approach as a “non-starter”. Unilever (-0.5%) remains subject to shareholder pressure with Schroders calling on the Co. to improve operationally. Finally, it is worth noting that the Swiss gov't is to hold a special session today to discuss the Credit Suisse/UBS deal; ahead of which, the Swiss Finance Minister said the merger should proceed smoothly and without political obstruction.

11 Apr 2023 - 09:23- EquitiesEU Research- Source: Newsquawk