EUROPEAN EQUITY UPDATE: Stocks see out July on a solid footing

Analysis details (09:33)

European equities (Eurostoxx 50 +1%) trade on a firmer footing and are on track to post their best performance since November 2020. Not a great deal has happened from a newsflow perspective since yesterday’s close, however, the ongoing repricing lower of expectations for global central bank tightening following the FOMC earlier in the week and yesterday’s US GDP print has proved to be supportive for equities with ECB pricing slipping below 100bps worth of hikes by year-end. Accordingly, traders will be eyeing the 10:00BST release of Eurozone GDP and CPI metrics with the latter of greater interest given the more timely nature of the figures and focus at the ECB on combating inflation; consensus looks for the Y/Y rate to hold steady at 8.6%. From a growth standpoint, Goldman Sachs suggests that a recession is yet to be fully priced into European equities with markets too complacent after the recent bounce; GS holds a 3-month price target for the Stoxx 600 of 390 (vs. current level of 436). Stateside, US futures are comfortably in the green (ES +0.8%, NQ +1.4%, RTY +0.4%) with sentiment bolstered after Amazon soared over 13.5% and Apple rose some 3% post-earnings. Today’s earnings slate includes pre-market reports from Aon, Chevron, ExxonMobil, Procter & Gamble and Abbvie. The latest BofA flow show revealed that equities saw their first week of inflows (week to July 27th) for six weeks (USD 5.6bln) with the regional breakdown showing inflows of USD 9.5bln in the US, USD 1.5bn out of Japan and USD 3.6bln out of Europe. From a sectoral standpoint tech’s outflow of USD 0.2bln was its largest in nine weeks whilst energy saw USD 1.3bln of outflows. Sectors in Europe are higher across the board with Construction and Materials the best performer in the region following H1 results from Vinci (+3.5%). Elsewhere, notable gains have also been observed in Basic Resources and Retail names with the former underpinned by price action in underlying commodity prices. Banking names have been bolstered by a strong showing from NatWest Group (+6.4%) and Standard Chartered (+2.6%) post-earnings who have benefitted from the more favourable rate environment. Lagging peers, but still in positive territory and off worst levels is the health care sector with AstraZeneca (-1.1%) acting as a drag despite boosting its 2022 forecast. Of note for the luxury sector, Hermes (+7.3%) sits at the top of the CAC 40 after announcing record profits in its H1 results. Finally, Signify (-7.8%) sits near the foot of the Stoxx 600 as supply chain disruptions and FX continue to squeeze margins.

29 Jul 2022 - 09:31- EquitiesData- Source: Newsquawk