EUROPEAN EQUITY UPDATE: Stocks steady and holding on to Friday’s gains

Analysis details (09:26)

• European equities (Eurostoxx 50 +0.1%) broadly trade marginally firmer with not much in the way of weekend newsflow to guide prices following Friday’s solid session for the region. This morning’s session has seen the final release of Eurozone services and composite PMIs, the former was revised lower to 55.1 from 55.9 and the later lower to 52.8 from 53.3. The accompanying release noted that "The euro area economy continued to expand midway through the second quarter. However, the rate of growth slowed for the first time in 2023 so far as a slightly softer upturn in services activity combined with the sharpest drop in factory output since last November."


• Asia-Pac stocks were mostly positive amid momentum from Friday's post-NFP gains on Wall St and as participants digested stronger Chinese Caixin Services and Composite PMI data. ASX 200 was led higher by gains across nearly all sectors, while the RBA is expected to keep rates unchanged at tomorrow’s meeting. Nikkei 225 outperformed and climbed above the 32,000 level for the first time since 1990. Hang Seng and Shanghai Comp. were kept afloat following the encouraging PMIs but with gains capped amid US-China frictions and after China’s Cabinet noted that the foundation for the economic recovery is not solid, while property names were also pressured despite reports that China is mulling a support package for the property sector and bolster the economy.


• US futures (ES +0.1%, NQ -0.2%, RTY +0.1%) are a mixed bag following Friday’s session of gains which saw the Russell 2000 close higher by 3.5% whilst the Nasdaq 100 was also firmer but lagged behind its peers amid some profit-taking in the AI space (NVDA and beyond) and with headwinds from the pronounced Treasury bear-flattening. As it stands, the ES is currently just shy of the 4300 mark, on which, Morgan Stanley sees the cash index at 4200 by Q2 2024 vs. Friday’s close of 4282.37. Today’s main macro focus in the US is on today’s ISM Services print with the headline expected to rise to 52.3 from 51.9. ING notes that today’s release “might have a somewhat contained impact on rate expectations, barring major diversions from expectations.” Furthermore, it is also worth noting that the Fed has entered its blackout period.


• Equity sectors in Europe are a mixed bag with Telecoms (Deutsche Telekom +2%, Vodafone +3.1%) top of the leaderboard following a tough session on Friday whereby some carriers were hit by reports suggesting that Amazon could enter the sector. Elsewhere, energy names have been supported by firmer crude prices after Saudi Arabia announced it is to cut an additional 1mln bpd of oil output in July and all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024. To the downside, Consumer Products & Services and Tech names lag. In a research note, Morgan Stanley downgraded European Financials to Neutral, upgraded Pharmaceuticals to Overweight and upgraded Food Retailing to Neutral. In terms of stock specifics, UBS says it will complete the takeover of Credit Suisse as early as June 12th, whilst FT reports suggest the Co. is mulling delaying its Q2 results for as long as possible amid financial and political "complexities" following the Credit Suisse takeover. Finally, Asos (+12%) shares are notably higher following bid speculation in The Times which notes the Co. was approached in late-December for a GBP 1bln takeover by Alibaba-backed Turkish online retailer Trendyol.

05 Jun 2023 - 09:26- EquitiesEU Research- Source: Newswires