EUROPEAN EQUITY UPDATE: Stocks slip as soured sentiment seeps through to Europe

Analysis details (09:53)

European cash markets kicked off the session lower across the board following the losses on Wall Street on Friday and the risk-off session seen in APAC overnight. The downside is seemingly emanating from a concoction of Fed tightening, worrying Chinese data, and with the Russia-Ukraine situation not showing signs of a cooldown – although President Putin presented a very short Victory Day speech, in which he made no major announcements, and some have framed it as a softer tone than expected - there were speculations that Putin will announce an escalation of military action. US equity futures have been trundling lower since the resumption of trade, with relatively broad-based losses seen across the ES (-1.2%), NQ (-1.4%), RTY (-1.2%), and YM (-1.2%), with higher yields exerting slightly more pressure on NQ. Analysts at Goldman Sachs suggest the outlook for US stocks is not particularly bright – “The best-case scenario for the economy -- and, eventually, for equity prices -- probably involves a continued period of constrained equity market returns… Risks around equity valuations are skewed to the downside even in our base-case, non-recessionary scenario.” Meanwhile, UBS believes quality US stocks stand out as the best positioned for the next phase of the cycle and sees a 15-20% upside for quality based on average performance in previous ISM peak to trough periods. Back to the session, European stocks remain heavy (Euro Stoxx 50 -1.3%; Stoxx 600 -1.4%) with sectors also lower, exhibiting more of a defensive configuration. Sectoral laggards include Travel & Leisure, Basic Resources, and Tech. The European tech index sees losses of over 2.5% at the time of writing, whilst Infineon (-3.0%) shares fail to benefit with raised guidance. In terms of other movers, activist Third Point initiated a long position in Glencore (-4.5%) in Q1, alongside continuing to add to its Shell (+0.6%) long position.

09 May 2022 - 09:53- Fixed IncomeResearch Sheet- Source: Newsquawk