EUROPEAN EQUITY UPDATE: Stocks suffer as rallies continue to be sold

Analysis details (09:32)

European equities (Eurostoxx 50 -2.1%) trade with heavy losses after wiping out gains seen at the start of the week as global commodity prices continue to fall. Despite the strong session yesterday in the US and to an extent Europe, rallies in equities continue to be sold and with a fair amount of impetus with the Stoxx 600 now at its lowest level since February 2020 and the SMI in bear market territory. Although there hasn’t been much in the way of fresh fundamentals for today’s price action, the ongoing backdrop of high inflation and global growth concerns continues to create a difficult backdrop for sentiment. Stateside, futures have also succumbed to the selling pressure with yesterday’s session of strong catch-up gains following the long weekend very much in the rear-view mirror for now as the ES (-1.8%) straddles the 3700 mark, whilst other majors are also heavily in the red; NQ -2.1%, RTY -1.8%. In terms of desk views, analysts at Barclays suggest that estimates for European equities need to be revised lower in order for stocks to find a bottom with consensus estimates currently defying gravity. Barclays notes that their assumptions for EU growth suggests circa 0% EPS growth for 2023 vs. current consensus of +5%, adding that a more material recession could see equities decline 10-15%. Sectors in Europe (ex-Food and Tobacco, which is supported by gains of 1.3% in Nestle) trade lower across the board with heavy selling pressure observed in Basic Resources and Energy names amid downside in underlying commodity prices, whilst other cyclical sectors such as Autos and Travel & Leisure are enduring a tough session thus far. In terms of stock specifics and bucking the trend, Natwest (+3%) sits at the top of the Stoxx 600 after the UK government announced a 12-month extension to the deadline for selling its stake in the Co., whilst FY results for JD Sports (+1.7%) has provided support for the sports retailer. To the downside, Umicore (-15.5%) is the laggard within the Stoxx 600 after its 2030 strategy update underwhelmed. Germany-heavyweight BASF (-5.4%) sits at the foot of the DAX after its CEO noted that H2 will likely be more difficult than H1 and will struggle to create margins on top of elevated energy prices.  

22 Jun 2022 - 09:32- EquitiesImportant- Source: Newsquawk