EUROPEAN EQUITY UPDATE: Stocks slip but SMI feels some reprieve whilst chips are hit after Apple sources

Analysis details (10:09)

Indices in Europe trade mostly lower, with the Euro-bourses posting broad-based losses across the board following as the downbeat sentiment reverberated from the APAC session. US equity futures are also lower with the NQ (-1.2%) posting deeper losses vs the ES (-0.9%), RTY (-0.8%) and YM (-0.8%). Fresh fundamentals during the European session have been light heading into month and quarter-end, but the ongoing themes continue to weigh on markets – inflation, recession concerns, central bank tightening, and geopolitics being some of the main themes. Analysts at Barclays have joined the group that is calling for a capitulation in equities and suggest that “investor capitulation is already visible and will likely intensify absent a circuit breaker”. The desk adds that the balance of risk is skewed to the downside for stocks, and “more equity selling is likely on the cards if earnings fundamentals deteriorate, and central banks don’t come to the rescue”. Meanwhile, analysts at Citi warn that investors are ditching European stocks at levels last seen during the Eurozone debt crisis, but “this could represent a contrarian signal to buy”. In terms of today’s session, broad-based weakness is seen across the Euro-bourses and FTSE 100 (Euro Stoxx 50 -1.4%; Stoxx 600 -1.4%), but the Swiss SMI (+0.1%) bucks the trend thanks to a clear outperformance in Healthcare amid the overnight news that Eisai (+17.3% at close) and Biogen (+50% pre-market) announced positive topline results for their Alzheimer’s drug, in turn supporting European heavyweight peer Roche (+5.3%), whilst Sanofi (+1.5%) also sees gains after noting Q3 will see positive currency impacts. Sectors aside from Healthcare are in the red across the board with a clear defensive bias as Consumer Products, Food & Beverages, Media and Utilities reside towards the top of the bunch. On the flip side, Banks, Real Estate, Retail, Insurance and Tech sit as the laggards, with the latter weighed on by source reports that Apple (-3.4% pre-market) is said to have given up plans on increased iPhone production due to lower demand – in turn hitting the chip sector in particular (ams -8.4%, STMicroelectronics -5.5%, Infineon -3.5%, ASML -3.2%, TSMC -2.8% pre-market). In terms of individual movers, Royal Mail (-7.8%) is pressured by further strike action. Over to banks, Deutsche Bank (-6%) is softer despite its CEO stating that he is very happy with the bank’s trading unit and the bank has comfortable liquidity in market turmoil, whilst peer Commerzbank (-5%) is hit after reporting a EUR 490mln provision related to mBank.

28 Sep 2022 - 10:11- EquitiesResearch Sheet- Source: Newsquawk