EUROPEAN EQUITY UPDATE: Stocks wane off best levels with eyes on US-Russia talks

STOXX 600: U/C

• European bourses began the session with a modest upward bias, but sentiment has gradually waned as the morning progressed to display a mostly negative picture in Europe.


• The EZ docket has included French CPI (final), which saw some modest revisions higher. The German ZEW Sentiment survey printed just above expectations; the accompanying read-out suggested that "rising optimism is probably due to hopes for a new German government capable of action".


• The overarching risk event today is the US-Russia delegation talks, which will discuss a path towards ending the Russia-Ukraine conflict. Markets are still awaiting the readout from the meeting; thus far, Russia’s Wealth Fund Head said that the "Trump administration is now ready to understand Russia's concerns". Russia's Kremlin said they cannot give an evaluation of the negotiation with US officials yet as they have only just started.


• BofA Fund Manager Survey highlights that investors are bullish and are long stocks, and short "everything else"; cash levels have hit their lowest in 15 years. 89% of respondents said US stocks are overvalued. On positioning: Euro-area longs rose to an eight-month high, UK shorts to an eleven-month high. Interestingly, the survey suggests that the trade war is seen as no more than a "tail risk".

Sectors: Mixed

• European sectors are mixed after initially opening with a slight positive bias; the breadth of the market is fairly narrow.


• Banks take the top spot, mainly driven by UK banks after the region’s latest jobs data saw a slight paring of BoE rate cut bets; Dec'25 -56.6bps (prev. -62.8bps).


• Consumer Products is found at the foot of the pile, joined closely by Chemicals and then Tech. The latter weighed on by significant losses in Capgemini (-8%) after the co. reported a mixed set of results, and its FY25 guidance fell short of expectations.

Others: FTSE 100 U/C, IBEX 35 +0.3%, DAX 40 U/C

• The FTSE 100 is essentially flat; banks are towards the top of the pile, given the relatively higher yield environment on the back of the moderately hawkish UK jobs data. On that, the unemployment rate unexpectedly held steady vs expectations of a tick higher; ex-bonus wages lifted from the prior (in-line with expectations), while the figure incl. bonuses came in marginally hotter than expected at 6%. For mining names, Antofagasta (+3%) gains after its results, where it reported higher margins amid booming copper demand; elsewhere, Glencore (+1%) benefits after receiving a broker upgrade at Morgan Stanley. BHP also reported its results today; its CEO is optimistic on the future of copper.

US Equity Futures: ES +0.2%, NQ +0.4%, RTY +0.1%

• Futures are modestly firmer, with slight outperformance in the NQ, as the region returns from holiday on account of Presidents’ Day.


• Schedule ahead includes some Tier 2 data; the NY Fed's manufacturing gauge for February is due, and an improvement to -1.0 is expected from the prior -12.6. Elsewhere, the NAHB's housing market index, and the December TIC flow data is due. On the speakers' slate, remarks are due today from Fed's Waller (voter) and Fed's Barr (voter; will speak on AI and financial stability).

18 Feb 2025 - 10:20- Fixed IncomeData- Source: Newsquawk