EUROPEAN EQUITY UPDATE: Stocks supported but off best levels as banking upside waned

Analysis details (09:32)

• European equities (Eurostoxx 50 +0.5%) kicked the session off on the front foot with gains in excess of 1% after the cash open and Banking names leading the charge. However, gains were faded shortly after without any obvious catalyst. From a macro perspective in the region, ECB speakers have continued to talk up the Eurozone banking sector, whilst the latest German IFO release beat expectations.


• Overnight, Asian stocks were mixed as markets took a breather from recent bank jitters, while Chinese stocks underperformed as attention turned to earnings.


• Stateside, US futures (ES +0.2%, NQ flat, RTY +0.4%) are largely showing modest gains as the slightly more pronounced upside seen at the European cash open was pared; ES is still managing to hold above the 4k mark. Banking developments over the weekend were positive; the FDIC early Monday announced that First Citizens (FCNCA) will assume all deposits and loans of Silicon Valley Bridge Bank, whilst the US is considering further support for banks and giving First Republic Bank (FRC) more time.


• The day ahead is thin, although this week there is a heavy amount of Fedspeak – including dual testimonies from the Fed’s Vice Chair of Supervision Barr – as well as inflation data from the US and the Eurozone.


• In terms of desk views, JP Morgan states that it remains of the view that Q1 will have likely marked the high point for equity prices for 2023, and looks for recessionary trading in H2, with low beta preference, and an increasing caution on Cyclicals/Banks/Value exposure. JPM adds that it does not expect a fundamental improvement in equities risk-reward until the Fed is advanced with rate cuts.


• Equity sectors in Europe are mostly firmer with just Basic Resources and Chemicals in the red. Health Care, Travel & Leisure and Autos are outperforming peers with Banking names middle of the pack despite leading the charge at the open.


• In terms of individual movers and helping support both the Stoxx 600 Health Care index and Swiss SMI is Novartis (+5.8%) after the Kisqali Phase III NATALEE trial met its primary endpoint; support for Health Care is also in part due to Sanofi (+1.8%) following a broker upgrade at Barclays. Elsewhere, broker action has been supportive for Orange (+2.7%) and Siemens Energy (+2.6%), whilst a downgrade for Pernod Ricard (-1.4%) has sent their shares lower. Finally, Cineworld (+8.5%) shares are gaining amid reporting from Sky News that Elliott Management has explored a bid for the entire Co., but its latest proposal is for the purchase of operations outside of the UK/US.

27 Mar 2023 - 09:32- Fixed IncomeResearch Sheet- Source: Newsquawk