EUROPEAN EQUITY UPDATE: Stocks set to close the week out with mild gains

Analysis details (09:25)

• European equities (Stoxx 600 +0.5%) trade on the front foot following yesterday’s solid showing on Wall St with the Stoxx 600 on course to close the week out with gains of around 0.6%. Once again, fresh macro drivers for the region remain light and therefore stocks are gaining impetus from elsewhere.


• Overnight in Asia, equities were mostly higher following the lead from Wall Street, though China markets lagged after disappointing sales stats from Alibaba. Japan's CPI figures were mostly in line with expectations, but showed a faster pace of acceleration.


• US equity futures are around flat following Thursday’s solid rally, though are holding above 4,200. The S&P 500 finally broke out of its horizontal ranges on Thursday to print fresh YTD highs, and futures are maintaining ground above 4,200 in pre-market trading. Capital Economics points out that this year’s rally, where the S&P 500 is up over 9%, has mostly been driven by a few large-cap stocks, while others have shown limited gains or even declines; CapEco says this trend is unlikely to continue. The Day Ahead is thin for scheduled data releases but busier for central bank speakers, especially for influential Fed voters. Today will feature remarks from Chair Powell, who will participate in a panel discussion with former Fed Chair Bernanke; NY Fed's Williams and Fed Governor Bowman are also due to speak in the US pre-market.


• The latest BofA Flow Show noted that in the week to May 17th, global equity funds saw USD 7.7bln of outflows with the regional breakdown as follows: 5th straight week of outflows for US equity funds at USD 8.7bln, USD 2bln out of European (outflows for the past 10 weeks), USD 0.4bln into Japan (two weeks of inflows), USD 3.3bln into EM (five weeks of inflows).


• Equity sectors in Europe are mostly firmer with Financial Services at the top of the leaderboard thanks to gains in UBS (+3.1%), whilst upside is also observed in Basic Resources and Tech with the former benefiting from underlying materials prices and the latter supported by yesterday’s price action on Wall Street. To the downside, Telecoms is the only sector in the red alongside losses in Telefonica Deutschland (-2.4%) following a broker downgrade at Deutsche Bank. Of note for the Eurozone banking sector, reporting via Bloomberg notes that the ECB is reportedly to increase scrutiny of bank liquidity and could lift capital requirements; could communicate such requirements later this year. Finally, positive broker action has proved supportive for the likes of BooHoo (+3%) and M&S (+1.5%).

19 May 2023 - 09:25- Research Sheet- Source: Newsquawk