EUROPEAN EQUITY UPDATE: Stocks steady with UK players away from market

Analysis details (09:20)

• European equities (Eurostoxx 50 +0.1%) trade with marginal gains in what has been a slow start to the week as UK markets are closed on account of the bank holiday. Macro updates for the region have been lacking aside from soft German industrial output data and comments from ECB’s Knot stating that the ECB is starting to see policy work but more needs to be done to contain inflation.


• In APAC trade, most stocks were positive, led by Aussie shares as commodity-related sectors saw upside after an energy rebate announcement. Japan's Nikkei lagged on its return from holiday closures, while China's Hang Seng and Shanghai Comp. gained after rises in energy and auto stocks. 


• US equity futures are hugging the unchanged mark with the ES lingering around the 4150 level. Weekend news flow has been limited, but has focussed on Berkshire Hathaway (operating earnings jumped in the quarter), the US fiscal drama (Yellen warned the saga could bring economic catastrophe, while Biden is set to meet Republicans on Tuesday), Apple shrugging-off the demand slump, and regional banking issues (PACW slashed its dividend but said its fundamentals were sound).


• Today, traders will focus on the Fed’s Senior Loan Officer survey (which Chair Powell already said highlights tightening credit conditions), the Fed’s Financial Stability Report will make for an interesting read amid tensions in the banking sector, while the inflation expectations components within the NY Fed’s consumer survey will provide a useful preview ahead of this week’s CPI and PPI data. 


• Goldman Sachs notes that big tech companies like Apple (AAPL), Amazon (AMZN), Google (GOOG), Meta (META), and Microsoft (MSFT) have collectively risen 29% this year, outperforming the S&P 500 by 23%, and has led to fewer types of companies driving the market. Goldman says these tech stocks are considered expensive when compared to the rest of the S&P 500, trading at a P/E ratio of 25x (a 49% premium vs its other index peers). Although some believe the high price is justified due to factors like improving earnings growth and quality, Goldman warns that if the economy improves and rates increase, these companies may not continue to perform as well. And if there is a recession, these stocks could be vulnerable since they are popular in hedge fund long portfolios.


• Equity sectors in Europe are mixed and lacking in breadth with outperformance in Energy and Banking names top of the leaderboard as the former is underpinned by upside in underlying crude prices. Individual movers are exceptionally quiet (due to UK markets being closed and light newsflow), nonetheless, PostNL (+11%) shares are markedly higher following strong Q1 results. Elsewhere, Italy's Treasury is reportedly prepared to support a joint purchase for Telecom Italia’s (-1.1%) grid by CDP and KKR, in order to resolve the impasse, via Reuters citing sources.

08 May 2023 - 09:20- EquitiesData- Source: Newsquawk