EUROPEAN EQUITY UPDATE: Stocks soft as CPI looms large

Analysis details (09:25)

• European equities (Eurostoxx 50 -0.3%) trade a touch below the unchanged mark in what has been a slow start to the session. Further ECB speak from Germany’s Nagel and Schnabel (late yesterday) has reaffirmed that further tightening is on the horizon with the latter noting that rate cuts are highly unlikely for the foreseeable future. That said, the latest interjections from the slew of speakers this week has had little sway on market pricing which continues to fully price in another 25bps hike and circa 70% chance of another thereafter.


• In the APAC session, stocks were mostly lower as the region digested a slew of earnings updates and following the weak handover from Wall Street.


• US equity futures are marginally softer (ES -0.2%, NQ -0.2%, RTY -0.2%) but ultimately continuing the horizontal trading patterns seen since last month. Debt talks in Washington failed to yield any breakthrough; talks will continue this week, and President Biden will meet Congressional leaders again on Friday. Today's main event is the CPI report for April, and although the Fed is in a conditional pause regarding rate hikes, the data could sway that narrative if it comes in hotter than expected. As a reminder, headline CPI is seen rising +0.4% M/M in April, picking up from the 0.1% M/M pace in March; the annual measure is seen unchanged at 5.0%. Core inflation is seen rising 0.4% M/M in April, matching the rate of growth seen in March, while the annual measure of core inflation is seen easing a touch to 5.5% Y/Y (prev. 5.6%).


• Equity sectors in Europe have a negative tilt with Retail and Personal Care Drug and Grocery names bottom of the pile, whilst Real Estate and Energy names are a touch firmer near the top of the leaderboard. In the banking sector, Credit Agricole (+5.4%) earnings beat expectations and saw the Co. note that “the Group recorded a strong commercial activity over the quarter across all business lines." Furthermore, ABN AMRO (+2.2%) beat on Q1 profits and stated “net interest income increased significantly as deposit margins went up and volumes grew compared with Q1 2022 and Q4 2022." The Auto sector is just about being kept afloat following Q1 results from Continental which beat on estimates and state that current interest rate developments are not having an impact on business.


• Elsewhere, Evotec (+10.4%) is the best performer in the Stoxx 600 after news that Novartis' Sandoz is to partner with Just-Evotec Biologics to develop Biosimilar Medicines. Disappointing earnings today have prompted heavy losses in Telefonica Deutschland (-6.7%), Siemens Healthineers (-6.4%), Alstom (-5.2%) and Lanxess (-3.4%).

10 May 2023 - 09:25- EquitiesData- Source: Newsquawk