EUROPEAN EQUITY UPDATE: Stocks slump as Banking names feel the heat

Analysis details (09:40)

European equities (Stoxx 600 -1.8%) are very much on the backfoot with the Stoxx 600 on course to close the week out with losses of around 2.9% and now sitting at levels last seen in late January. The selling pressure follows on from the losses seen on Wall Street which came amid a mixture of financial contagion fears, tax hike talk and geopolitics. The primary focus has been on the former after SVB Financial (SIVB) dropped more than 60% on the day after it filed a USD 1.75bln stock offering to help with its cash burn and which added to fears after the recent Silvergate (SI) crypto woes in the sector, while the rout saw the four biggest US banks shed more USD 50bln in market cap. It is worth noting that some desks suggest that some of the contagion panic seen across larger “systemically important” US banks yesterday was overdone with Silvergate and SVB’s woes viewed as potentially more idiosyncratic given their respective exposure to crypto and the tech sector (a more detail analysis piece can be viewed here). The APAC session was a downbeat one with selling across the board following the weak US handover, whilst Japanese bank shares also having to contend with the BoJ maintaining ultra-loose policy settings. US futures (ES -0.4%, NQ -0.1%, RTY -0.5%) remain under pressure with the ES hovering around the 3900 mark. Asides from the fallout from yesterday, focus will be on the upcoming US NFP report whereby consensus looks for an addition of 205k for February. Traders will frame the data in the context of the FOMC’s March 22nd meeting. Ahead of which, Fed Chair Powell this week guided expectations towards a 50bps rate rise at that meeting, and suggested that the FOMC is likely to revise its view of the terminal rate higher. The latest BofA flow Show (in the week to Wed 8th March) noted that USD 0.5bln left global equity funds. Regional flows: US USD 5.2bln outflows (5th week), Europe USD 900mln inflows, Japan USD 3bln outflows, EM USD 1.6bln inflows (4th week). Equity sectors in Europe are lower across the board with the exception of Utilities. Unsurprisingly, Banking names are lagging peers with the Stoxx 600 Banking sector down 4.1% with individual names simply too many to mention. Other laggards but to a lesser extent include, Autos, Retail and Insurance. In terms of individual movers, Leonardo (+2.1%) is one of the best performers in the region post-earnings whilst Vodafone (+1.5%) shares have been supported following Bloomberg reporting that the Co. and Three UK are reportedly in late-stage talks on a tie-up.

10 Mar 2023 - 09:40- Fixed IncomeResearch Sheet- Source: Newsquawk