EUROPEAN EQUITY UPDATE: Stocks trim earlier losses ahead of US’ return from holiday

Analysis details (09:58)

The geopolitically soured APAC trading sentiment permeated into Europe, with the Stoxx 600 index opening lower by 1.5% and both the CAC 40 and DAX 40 initially posting losses of around 2.5% apiece. Since then, the majors have trimmed losses – some suggest the improvement in sentiment could be due to Russia not showing a willingness to contest for more Ukrainian territory, and hence the situation could be contained regionally for now, while US officials and PM Johnson “have gone out of their way to say this is not an invasion, and that more sanctions await in case of an actual invasion,” IFR notes. Further, sources quoted by Politico have suggested that the EU will likely impose limited sanctions, in what is described to be more of a symbolic move – potentially alleviating some of the worst fears. The Stoxx 600 -0.7% whilst the CAC 40 (-0.9%) and DAX 40 (-0.8%) narrowly lag the European benchmark. US equity futures have also recovered off the worst levels whilst US players get the first chance to react to the geopolitical developments since Friday. Nevertheless, The ATX (-1.8%) remains under heavier pressure due to Austria’s location and its banks’ exposure to Russian tensions – Austrian-based banks are the most exposed to Russian claims, according to Nomura. Raiffeisen Bank (-8.0%) sees the deepest losses, with the bank also attempting to soothe investor nerves by suggesting it will deploy its crisis plan in the event of an escalation. The pullback in yields provides an additional and broader-based negative impact to the banking sector, which currently resides as the sectorial laggard. Energy stands as the only sector in the green – and with respectable gains – due to the surge in crude and NatGas prices, as President Putin ordered troops to cross the border on a peacekeeping mission. Thus, the FTSE 100 (-0.5%) sees its losses cushioned by index heavyweights BP (+1.8%) and Shell (+2.5%). That said, Russian oil major Rosneft’s UK-listing (-10%) is hit as Sky News Arabia reported the UK sanctions on Russia will include the defence industry, oil and gas companies, banks, financial institutions and chemical companies. In terms of individual movers, Hargreaves Lansdown (-20%) sits at the bottom of the Stoxx 600 after reporting 20% fall in profit for the first half of the year. Antofagasta (+1.8%) is supported after its FY earnings topped forecasts across the board. Away from earnings, the German auto sector saw a boost amid reports Volkswagen (+9.0%) is in advanced talks with Porsche Automobile SE (+10.0%) over a possible IPO of Porsche AG, although a final decision has not yet been made.

22 Feb 2022 - 09:58- EquitiesGeopolitical- Source: Newsquawk