EUROPEAN EQUITY UPDATE: Stocks struggle in quiet trade

Analysis details (09:25)

• European equities (Eurostoxx 50 -0.3%) trade with modest losses in what has been a slow start to the week for the region other than various ECB speakers reaffirming that further action from the bank will be forthcoming.


• Stocks in the Asia-Pacific region were mixed; Aussie shares were pressured after Australia's largest bank CBA reported a slight increase in Q3 cash profits, but said many customers were struggling with higher interest rates and living costs. Japan's Nikkei 225 outperformed, reclaiming 29,000 status. In China, trade figures were mixed, with stronger-than-expected export growth vs a surprise contraction in imports.


• US equity futures are slightly red (ES -0.2%, NQ -0.3%, RTY -0.2%) with markets seemingly lacking firm direction ahead of today’s debt ceiling talks between President Biden and Republican leaders at 16:00EDT/21:00BST. Elsewhere, tomorrow’s US CPI release looms large.


• JP Morgan says it believes that the time has come to close the trade of OW Eurozone vs the US. JPM notes that the “best of the improvement in Eurozone activity is likely behind us”, adding that the “ECB is likely to stay hawkish, due to persistent inflation, implying that the Growth–Policy tradeoff is likely to deteriorate”. As it stands, JPM has the following regional pecking order: OW UK, Japan and smaller parts of DM, such as Switzerland, stays unexcited by EM, Neutral vs DM, and keeps UW in the US, now joined with an UW in Eurozone.


• Elsewhere, JPMorgan strategist Marko Kolanovic said that although the Fed's recent rate hike may be its last of the current tightening cycle, expectations among US stock investors that the worst of pressures may have passed will be proven wrong as recession risk still looms. Kolanovic believes that equities are set to weaken for the remainder of the year as the full impact of interest-rate hikes catches up to the economy, adding that if rate cuts happen this year, it will either be because of the onset of a recession or a significant crisis in financial markets.


• Equity sectors in Europe hold a slightly negative tilt with underperformance in Real Estate names after data from Halifax showed UK house prices falling -0.3% M/M in April (prev. 0.8%), whilst some desks also cite yesterday’s downgrading of Swedish landlord name SBB to junk as another headwind for the sector.


• Individual updates have seen solid earnings from Fresenius SE (+6.9%) which has sent its shares to the top of the Stoxx 600 whilst Fresenius Medical (+1.7%), of which it owns 32% has benefited from its own metrics. To the downside, negative results have weighed on the likes of K+S (-5.9%), Direct Line (-5.9%) and Daimler Truck (-3.5%). Finally, Credit Suisse CEO Ulrich Körner is to join the UBS Group Executive Board at the closing of the Co.’s deal which is anticipated to take place in the next few weeks.

09 May 2023 - 09:25- Research Sheet- Source: Newsquawk