EUROPEAN EQUITY UPDATE: UK lags pre-BoE, EU trades mostly higher, and US futures move sideways

Analysis details (10:25)

A mixed performance is seen across Europe following a similar sentiment seen across APAC markets overnight. US equity futures are flat/subdued but near yesterday’s best levels. In terms of macro commentary, analysts at Goldman Sachs are warning that a short-term rally in stocks could increase the risks of another selloff as opposed to signalling the end of a bear market amid a lack “of a positive shift in macro momentum” – the bank reaffirms their recommendation of defensive allocation over three months whilst waiting for clarity. In-fitting with this view, Bernstein strategists also warn of another leg lower for the equity market in the short term and suggest that it “makes sense to sit on the sidelines for now.” The desk favours “more defensive, high quality, long duration sectors, such as health care, consumer staples, utilities, technology, telecoms, as well as energy, over next 6 months”. Back in Europe, the FTSE 100  (-0.3%) is among the losers in the run-up to the BoE announcement and presser as the central bank is expected to hike by 50bps (full Newsquawk preview in the Research Suite). EU bourses are trading mostly firmer, except for the AEX (-0.5%) – which sees pressure from ING post-earnings, whilst the Dutch listings of Shell (-0.8%) and Unilever (-0.6%) are also softer, with the former bearing the brunt of the recent oil decline, whilst both heavyweights are potentially seeing read-across weakness from their UK listings. Sectors are mixed with an anti-defensive tilt. Several interesting earnings were released pre-market: in materials, Glencore (+1.7%) will return USD 4.5bln to shareholders after H1 profit more than doubled on surging coal prices. In industrials, Deutsche Lufthansa (+5.1%) is limiting ticket sales in Q3 amid the travel chaos. Rolls-Royce's (-8.3%) sales were slightly short, guidance was unchanged but cautioned that the external trading environment remained challenging. The retail sector outperforms on the back of several upbeat earnings: Next (+0.2%) lifted its outlook on strong demand for apparel, Zalando (+11.0%) saw a weak Q2 but forecasts better fortunes ahead, and Adidas (+3.0%) saw sales increase but profits down almost a third. Finally, in banking, ING (-3.1%) saw better than expected pre-tax profit, while Credit Agricole (+3.8%) saw a surprise rise in Q2 profits.

04 Aug 2022 - 10:24- Research Sheet- Source: Newsquawk