EUROPEAN EQUITY UPDATE: Stocks slip further after flash PMIs flag recession and more inflation

Analysis details (10:11)

Equities in Europe have extended on losses, with downside seen since the cash open despite a lack of fresh drivers at the time and following an overnight consolidation session across equity futures. The morning saw the release of the September Flash PMIs which flagged further economic deterioration in the region with a recession on the cards. Furthermore, looking past the numbers, the inflation commentary was bleak, with the French, German, EZ, and the UK release highlighting a common theme of rising inflationary pressures led by energy as opposed to supply constraints, with the EZ commentary suggesting “The surge in energy costs has meanwhile reignited inflationary pressures which, having shown some signs of cooling in prior months amid easing supply shortages, have reaccelerated.”, and added that “The challenge facing policymakers of taming inflation while avoiding a hard landing for the economy is therefore becoming increasingly difficult.” Meanwhile, geopolitical tensions remain high - Chinese Senior Diplomat Wang Yi said US-China ties are at a low ebb, whilst referendums on Russian annexation have begun in occupied Ukrainian territory. US equity futures are softer in tandem with relatively broad-based losses of around 0.6-0.7% at the time of writing, ahead of an appearance by Fed Chair Powell later, although he is unlikely to add much to his speech from the FOMC presser on Wednesday, with no tier 1 data since the mid-week to shift the Fed’s dials. Back in Europe, varying degrees of losses are seen across the regional bourses (Euro Stoxx 50 -1.1%; Stoxx 600 -0.8%), whilst the UK’s FTSE 100 (-1.0%) extended on losses while the UK Chancellor unveiled the mini-budget, although housing names saw gains as the UK will cut Stamp Duty and Land Tax, with the exemption limit to be doubled to 250k, and first-time buyers will get an exemption of GBP 425k. Sectors are now all lower and hold a defensive bias, with Healthcare, Food & Beverages among the more cushioned sectors. In terms of individual movers, Airbus (+3.0%) resides as one of the Stoxx 600 winners following overall constructive guidance. Finally, AstraZeneca (+0.2%) trades off highs but holds onto some gains after the Co’s Ultomiris has been approved in the EU.

23 Sep 2022 - 10:10- Research Sheet- Source: Newsquawk