EUROPEAN EQUITY UPDATE: Stocks slump on a busy day for CB tightening

Analysis details (09:40)

• European equities (Eurostoxx 50 -1.2%) trade on the backfoot with selling pressure having picked up since the cash open without a clear fundamental driver. Today is set to be a session dominated by central bank action with markets currently digesting rate hikes from the SNB and Norges with the latter surprising with a 50bps adjustment (vs. consensus of 25bps) and signalling the likelihood of a further move in August. Focus ahead will be on events at the BoE with consensus looking for a 25bps hike, however, given yet another hot inflation report from the UK yesterday, market pricing is split between a 25bps or 50bps increase. In the event that the MPC sticks with its 25bps cadence, focus will be on what signalling, if any, the bank provides on future tightening and whether it readopts its “forceful” language around such moves. Traders will also be mindful of events at the CBRT whereby consensus looks for a 1250bps hike from the Bank. That said, such a move is unlikely to impact the broader tape.


• APAC stocks were mostly lower following the tech-led declines on Wall St and with risk appetite also constrained by key holiday closures with markets across the Greater China region shut for the Dragon Boat Festival. ASX 200 was pressured with weakness across all sectors. Nikkei 225 traded negatively but with the downside limited by recent currency weakness and dovish comments from BoJ Board Member Noguchi. KOSPI was positive with the index underpinned by investment-related headlines including reports that European companies pledged investments in South Korea related to batteries, future cars and other cutting-edge industries.


• US futures (ES -0.2%, NQ -0.3%, RTY -0.2%) are also softer on the session, albeit to a lesser extent than European peers with the ES just about holding above the 4400 mark. In the absence of tier 1 US data points, focus will continue to fall on upcoming Fed speak (Powell, Mester and Bowman are all due) and particularly whether any other officials at the Bank are leaning towards the view put forward by non-Voter Bostic yesterday in which he suggested that rates should stay where they are for the rest of the year. Such a view somewhat undermined yesterday’s comments from Chair Powell in which he suggested that the two hikes pencilled into the dot plot were a “pretty good guess of what will happen".


• Equity sectors in Europe are lower across the board with selling pressure most prominent in Banking, Autos and Travel & leisure names. In terms of individual movers, Ocado (+21%) is by far the best performer in the Stoxx 600 amid speculation in The Times that Amazon could be a potential suitor for the Co. and was “pondering the merits of an GBP 8/shr move”. SES (+4.1%) is another notable gainer following news that the Co. and Intelsat have ended merger talks. To the downside, Sweden’s SBB (-10.2%) sits at the foot of the Stoxx 600 following news that Sweden's FSA will investigate whether SBB broke accounting rules in 2021 annual report. Finally, SES Imagotag shares have been suspended after Gotham City Research released a short report on Co. saying "We believe SESL financial statements are materially misleading, incorrect, and deficient. An independent & comprehensive investigation would confirm our opinions."

22 Jun 2023 - 09:40- Research Sheet- Source: Newsquawk