EUROPEAN EQUITY UPDATE: Stocks trade sideways with no clear conviction as focus turns to the Fed Chair

Analysis details (09:57)

• Equities in Europe have been moving in a contained range on either side of the break-even mark as participants gear up for Fed Chair Powell’s appearance slated for 15:00GMT/10:00EST – he will deliver his Semi-annual Monetary Policy to the Senate Banking Committee today and will likely repeat his remarks to the House Financial Services Committee on Wednesday. The hot run of US data in January and February has seen a hawkish repricing of the Fed’s expected rate hike trajectory. Powell’s message is likely to remain data-dependent and reiterate that the Fed’s job on managing inflation has not yet concluded, despite the progress made. Analysts have noted that the Fed Chair’s testimony will come ahead of any key economic data releases (the NFP report is on Friday, CPI on March 14th and PPI on March 15th), and accordingly, that might leave little scope for him to alter messaging. Note, the pre-release of a text has not been touted, although, in 2022, the text was released at 13:30GMT/08:30EST ahead of the appearance at 15:00GMT/10:00EST. US equity futures trade horizontally with a modest upward tilt in the run-up to the main event (ES +0.3%, NQ +0.3%, RTY +0.3%, YM +0.2%).


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  Sentiment overnight was mostly bid after the RBA opted for a less hawkish statement after the much-anticipated 25bps hike, whilst Chinese trade data showed its trade surplus printing above forecasts in Dollar terms, although imports contacted more than expected while exports saw a shallower-than-forecast contraction. That being said, Chinese equities saw a sharp reversal lower into the final hours of trade despite a clear catalyst at the time, although desks point to the overall weak trade data.


• In Europe, equities swung between gains and losses in the early hours of trade but thereafter drifted into modest positive territory in what coincided with a slight downtick in the ECB Consumer Survey 12-month ahead Inflation expectations to 4.9% from the prior of 5.0%. Sticking with central banks, BoE’s hawk Mann sang from her hawkish hymn sheet but failed to rattle UK equities. At the time of writing, Europe is painting a mixed picture (Euro Stoxx 50 +0.1%, Stoxx 600 +0.3%) in what has been a choppy but confined session thus far ahead of the aforementioned risk event. Sectors in Europe are mostly firmer with outperformance in Retail, Utilities, and Healthcare, whilst Banks, Telecoms, and Tech reside on the other end of the spectrum, although the breadth of the market is relatively narrow. Notable individual movers are largely earnings-driven, however, shares in Wood Group (+15%) soared after the Co. received a proposal from Apollo to be acquired at GBP 2.37shr. Wood Group said the proposal undervalues the firm. Elsewhere, US-listed Meta (+1.6% pre-market) is firmer amid reports the Co. is said to be planning thousands more layoffs as soon as this week.


• Finally, in terms of some bank commentary, analysts at BlackRock see the European banking sector extending its rally as the sector remains cheap and the ECB remains committed to controlling inflation, suggesting banks could be in more of a position to return cash to shareholders. The desk remains cautious on energy amid the mild winter hitting demand for oil and gas, but is more positive on the sector in the medium term. BlackRock also flags signs of margin pressure in Europe following Q4 earnings and recommends staying selective as firms with higher exposure to wage costs could continue to struggle this year.

07 Mar 2023 - 10:00- Research Sheet- Source: Newsquawk