EUROPEAN EQUITY UPDATE: Stocks steady as the clock ticks down to EZ inflation

Analysis details (09:30)

• European equities trade with little in the way of firm direction (Stoxx 600 flat) with the Stoxx 600 on track to close the week out with gains in excess of 3%. The macro story for the region today has remained on the inflation landscape with slightly firmer Y/Y CPI metrics for France, adding to hotter-than-expected prints from Germany and Spain yesterday ahead of the EZ-wide release at 10:00BST whereby the stickiness of core inflation will likely be the main focus.


• The handover from the APAC region was mostly firmer as stocks took impetus from the tech-led gains on Wall Street and with participants digesting better-than-expected Chinese PMI figures.


• US futures (ES, NQ and RTY all flat) are hugging the unchanged mark ahead of key PCE data released before the market open; the Fed’s preferred gauge of inflation. The Fed remains data-dependant, so the release will help shape expectations regarding the May 3rd meeting, where markets are unsure whether the central bank will keep rates unchanged or will lift them by 25bps.


• Analysts at Citi have upgraded US stocks to overweight from underweight, whilst downgrading European (ex-UK) stocks to Neutral. Citi adds that global equities should remain rangebound to year-end, with volatility set to continue in the near term before an eventual rebound in the back half of this year. From a sector standpoint, Citi has upgraded the global Tech sector to Overweight and downgraded the global Financial sector to Neutral from Overweight. Elsewhere, analysts at Bernstein are of the view that on an absolute and relative basis, UK shares are cheap and should outperform US counterparts. Morgan Stanley says that global stocks are currently resilient on account of 1) a weaker USD, 2) a continued rise in the global economic surprise index, 3) stable earnings revisions and 4) low investor sentiment.


• Equity sectors in Europe have a positive tilt with Personal Care, Drug & Grocery names top of the leaderboard whilst Banking names lag to the downside; Bankinter (-3.3%) and Caixabank (-1.7%) are two standout laggards within the sector following broker downgrades at Keefe Bruyette. Airlines are performing well with Air France (+2.8%), Deutsche Lufthansa (+1.8%) and IAG (+1.6%) all upgraded at Deutsche Bank and easyJet (+3.6%) upgraded at Barclays. Finally, H&M (+2.8%) has extended on yesterday’s post-earnings gains following broker upgrades at HSBC and Danske Bank.

31 Mar 2023 - 09:30- EquitiesData- Source: Newsquawk