EUROPEAN EQUITY UPDATE: Stocks soar as Chinese intervention and geopolitics support pre-FOMC sentiment

Analysis details (09:33)

Stocks in Europe see exuberance (Euro Stoxx 50 +2.9%; Stoxx 600 +2.2%) as the positive tone from Wall Street and China (following State intervention) was boosted further by constructive commentary from Russia regarding diplomatic progress with Ukraine, all ahead of the FOMC later. First, to elaborate on China, the gains came as the China State Council held a financial meeting in which it vowed to keep its stock markets stable and said China will adopt effective policies to handle developer risks. Chinese Vice Premier Liu He stated that they will take measures to boost the economy in Q1 and monetary policy should take initiatives to support the economy, while they will continue to support overseas share listings. Lui He also noted that talks between China and US regulators on Chinese-listed companies in the US have made positive progress (Chinese ADRs are surging pre-market). The Shanghai Comp gained over 3% and the Hang Seng rose some 9% with the Hang Seng Tech Index soaring 20%. European and US equity futures coat-tailed on the positivity heading into the European open. Shortly after the open, Russian Foreign Minister Lavrov said peace talks with Ukraine are not easy but there is some hope for a compromise and some formulations of agreements with Ukraine are nearing being agreed upon. This followed hopeful commentary yesterday from the Ukrainian President who suggested talks with Russia had become more ‘realistic’. That being said, a Russian negotiator cited by Interfax said talks are slow and difficult. US equities futures see shallower gains than their European counterparts, with Asia’s tech performance providing additional tailwinds to the NQ (+1.8%) vs the ES (+1.2%), RTY (+1.1%) and YM (+0.9%). Upside however is capped by the looming FOMC whereby the Fed Funds target range is expected to be lifted by 25bps and the accompanying SEPs are expected to signal a string of hikes to follow this year (full Newsquawk preview available in the Research Suite). Before that, US President Biden is to speak on Ukraine at 15:45GMT/11:45EDT today. Back in Europe, cash markets continue to add to gains but Euro-bourses outperform. Sectors are firmer across the board and portray a clear cyclical bias with Tech influenced by the Hang Seng Tech Index’s performance overnight. The defensive sectors reside towards the bottom of the pack alongside Energy and Utilities. In terms of individual movers, BMW (+2.0%) is firmer after updated guidance whilst E.ON (+1.5%) and Inditex (+1.0%) remain supported post-earnings. Equinor (+2.0%) bucks the Energy trend after it announced it is to take steps, together with Norwegian authorities, to meet the gas demand in Europe.

16 Mar 2022 - 09:32- Fixed IncomeResearch Sheet- Source: Newsquawk