EUROPEAN EQUITY UPDATE: Stocks supported into HY-end. ASML acts as a drag on tech

Analysis details (09:27)

• European equities (Stoxx 600 +0.5%) trade on the front-foot with the Stoxx 600 on track to close the week out with gains of around 1.4% ahead of Eurozone inflation data at 10:00BST. Ahead of which, it is worth recapping regional prints thus far, whereby German inflation rose to a rate of 6.4% Y/Y in June, rising from 6.1% Y/Y in May. ING said that the pause in the previous months' disinflationary pattern is expected to be short-lived, as inflation is anticipated to gather further momentum following the summer. Spain flash HICP eased to 1.6% Y/Y in June (exp. 1.5%, prev. 2.9%) driven by lower energy and food inflation French HICP printed 5.3% Y/Y in June (exp. 5.4%, prev. 6.0%). From a policy perspective, the ECB is expected to lift rates by 25bps in July, and President Lagarde cemented those expectations during remarks at Sintra this week; the outlook for September is more of a question.


• Asia-Pac stocks mostly traded with cautious gains amid the higher yield environment. ASX 200 (+0.1%) lacked direction as gains in commodity-related sectors and utilities offset the losses in real estate and tech. Nikkei 225 (-0.1%) was subdued after mixed data releases including disappointing Industrial Production and softer-than-expected Tokyo CPI although the losses were cushioned by recent currency moves. Hang Seng (+0.2%) and Shanghai Comp. (+0.6%) were initially choppy but ultimately gained after the latest Chinese PMI data in which headline Manufacturing PMI matched estimates at 49.0 and Non-Manufacturing PMI was slightly softer-than-expected at 53.2 (exp. 53.3) but remained at a firm expansion.


• US equity futures are around flat/tilting higher ahead of today’s key PCE data for May, before traders head out for the long Independence Day holiday weekend. Personal Income, Spending and PCE data is the main event. Final University of Michigan sentiment data for June will be eyed, particularly after the Conference Board’s gauge posted a solid upside surprise amid lower inflation, earlier in the week. The Chicago PMI is expected to pick up in June, though still remains beneath 50.0.


• The latest BofA Flow Show revealed that USD 1.5bln went into equities in the week to June 28th with the regional breakdown showing: USD 1.6bln out of US (2nd week of outflows), USD 4.6bln out of Europe (16th week of outflows), USD 1.4bln into Japan (4th week of inflows), USD 4bln into EM. In terms of style, USD 2.6bln went into US large caps, USD 20mln out of small caps, USD 1.1bln out of growth, and USD 6.4bln out of value. By sector, the biggest inflow was to Tech at USD 0.5bln, the biggest outflow was USD 0.6bln from energy.


• Equity sectors in Europe are higher across the board with the exception of technology which is being weighed on by ASML (-2.6%), which is also acting as a drag on the AEX (unch.) following news that the Dutch Foreign Ministry has issued new computer chip equipment export rules whereby an export license will be required for certain technologies. Note, ASML has stated that it does not expect measures to have a material impact on its financial outlook. To the upside, Energy names have been supported by higher crude prices with Siemens Energy (+2.6%) a gainer within the sector after being reiterated overweight at JP Morgan Chase. Real Estate names are also on a firmer footing after Leg Immobilien (+3.5%) raised guidance and UK Nationwide house price data beat expectations. Engie (+1.5%) shares have been supported after raising guidance, whilst earnings have weighed on Sodexo (-2.3%). Finally, Accor (+1.2%) and SocGen (+1.5%) have been boosted by respective broker moves at Goldman Sachs and Deutsche Bank.

30 Jun 2023 - 09:27- Research Sheet- Source: Newsquawk