EUROPEAN EQUITY UPDATE: The recovery rolls on in Europe

Analysis details (09:35)

European equities (Stoxx 600 +1.5%) trade on a firmer footing in an extension of the gain’s seen yesterday. There is no clear fundamental catalyst for the upside seen thus far, however, it is worth noting that after Monday’s heavy losses, the Stoxx 600 remains some 3.1% lower WTD. Stateside, futures are also in the green with the NQ (+1.4%) outpacing the ES (+1%) with some support garnered from pre-markets gains of 2.5% for Microsoft despite initially falling 5% in after-hours trade as markets eventually focused on the company’s better-than expected guidance. Notable earnings today include AT&T, Abbott Labs and Boeing in the pre-market with Tesla and Intel due to report after-hours. From a macro perspective, focus will fall on the latest FOMC policy announcement which is expected to be a signalling event for a March rate lift-off as the Fed's asset purchases near a conclusion. In a recent note, analysts at Barclays have suggested that mutual funds and retail investors are “very overweight” equities, whilst CTAs and hedge funds have lowered exposure sharply, adding that further de-risking could be seen if fundamentals deteriorate. Elsewhere, Bernstein anticipates value stocks to continue tactically outperforming amid rising yields, a growing economy and stronger earnings. Sectors in Europe are higher across the board with the Stoxx 600 Travel & Leisure sector (+4.7%) the clear outperformer and enjoying its best session since February 2021 amid gains in airline names. The likes of IAG (+6.8%) and Deutsche Lufthansa (+6.6%) were named as “top picks” by Stifel, whilst upgrading easyJet (+5%) to “buy” with Stifel anticipating a dynamic traffic recovery this summer for airlines. Elsewhere, gains are broad-based across a bulk of the other sectors such as Basic Resources, Oil & Gas, Banks and Technology. In terms of individual movers, Tod’s (+10%) is a notable gainer in the region after FY revenues exceeded expectations. Elsewhere, Vestas Wind Systems (+4.7%) is seen higher post-FY 21 results. To the downside, Essity (-3.6%) and Sage (-2.7%) sit near the foot of the Stoxx 600 after earnings reports disappointed.

26 Jan 2022 - 09:35- Equities- Source: Newsquawk