EUROPEAN EQUITY UPDATE: Stocks slide amid hot German regional CPIs and as PM Truss doubles down

Analysis details (10:12)

European stocks are experiencing another bleak session thus far as the overnight gains in futures dissipated heading into the cash open. The turnaround in sentiment coincided with a hot double-digit CPI release from the German state of North Rhine Westphalia (with upticks in all regions) ahead of the mainland figure. Risk aversion further materialised as the morning went underway and as UK PM Truss (expectedly) doubled down on the fiscal package announced last Friday, which sparked turmoil across UK assets until the BoE stepped in yesterday. The morning has also seen a raft of ECB speakers across the wires who are in unison when it comes to raising rates at the next several meetings, whilst a number of Governing Council members back a 75bps move in October. Furthermore, the German Economic Institute downgraded its 2023 GDP growth forecast which now sees a recession at -0.4% (vs prev. forecast of +3.1%). US equity futures are also trading with losses across the board, with relatively broad-based losses of 1.3-1.5% seen across the front-month contracts. European cash markets are under pressure and reside near session lows (Euro Stoxx 50 -1.4%; Stoxx 600 -1.5%), with the UK’s FTSE 100 (-1.5%) off worst levels after initial underperformance during PM Truss’ radio rounds. Sectors are in a sea of red with no clear theme. Autos kicked off the day as the outperformer as Porsche AG IPO'd at a premium to the guided price of EUR 82.50/shr, +3% vs the IPO price at the time of writing, but parent Volkswagen (-4.8%) and holding company Porsche SE (-8.5%) have been on a downward trajectory this morning. Real Estate also resides as a laggard, with reports in The Times suggesting that UK mortgage affordability rules could mean borrowers may have to prove they can afford interest rates of up to 7% when applying for a mortgage, although the current Stoxx 600 loser Barratt Development (-11.0%) is trading ex-div today. The Retail sector is also hit following downbeat trading updates from Next (-8.3%) and H&M (-2.4%) in which the former cut its outlook and suggested August trade was below expectations and cost of living pressures are set to rise in the coming months.

29 Sep 2022 - 10:17- Research Sheet- Source: Newsquawk