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STRONG START TO THE WEEK FOR EUROPEAN SHARES (1539 GMT)
The pan-European STOXX 600 index has closed 0.88% up, with the FTSE 100 enjoying a 1.5% lift against a quiet backdrop with U.S. markets closed for the day.
But they are still 8.4% lower than two weeks ago.
European travel stocks were the best performing on a sector basis today, 3.05% up followed by banks ending the day 3.3% higher.
Construction and materials were the worst off, falling 1.7%, dragged down by insulation maker Kingspan Group's shares which were the poorest performers on the STOXX 600 today, falling 11.4%.
(Lucy Raitano)
ZURICH: NEXT ONE TO FALL TO THE BEARS? (1200 GMT)
Many top European country benchmarks are already down more than 20% from their record closing highs, meaning that a bear market patter is confirmed for them - as it is for their more illustrious U.S. peer, the S&P 500.
Among these are the CAC 40 in Paris or the AEX in Amsterdam but still resisting are Zurich and Frankfurt, which are helping the broader STOXX 600 keep an around 2% margin from officially entering a bear market.
The recent strength in the Swiss franc following last week's hawkish surprise at the SNB however has undermined the exporter heavy Swiss index SMI which with just a 0.5% margin to a bear market could be the next one to fall, if things worsen.
The German DAX is still 1% away from confirming a bear market.
EASYJET SHARES DESCEND AS RIVALS TAKE OFF (1124 GMT)
Easyjet shares are falling 1.9% today despite the wider travel index ticking up 1.23% while its European peers appear among today's biggest risers on the STOXX 600 .
Easyjet posted a trading update announcing more cuts to flights this summer as it tries to manage ongoing disruption, sending shares down.
Meanwhile Tui shares are up 5.8%, Deutsche Lufthansa shares are rising 4.6% and shares in British Airways owner IAG are up 3.6% today. Ryanair is up 2%.
"This year’s summer season was meant to be a festival of resilience for airlines, a chance to show off their strength at getting through the pandemic," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown in a note, who said the industry instead has been hit by a PR "firestorm".
British holiday-makers have been dealing with airport carnage as flights are cancelled last minute amid worker shortages coupled with a post-pandemic surge in demand for flights.
Easyjet's plans will prolong its post-pandemic recovery, according to Lund-Yates, but she ends on a positive note.
"Underneath all the noise, trends are positive. Crucially, demand for travel is there. Not being able to service that demand fully is a crying shame, but it does bode well for the future."
(Lucy Raitano)
MEH: FRANCE'S HUNG PARLIAMENT STIRS LITTLE ACTION (0923 GMT)
France woke up on Monday with a hung parliament and a political deadlock but if one could sum up the reaction of international investors it would probably sound like: "meh"!
The euro started the day making gains against the dollar, suggesting that the fate of the euro zone is really not at stake here.
"This morning the euro was not affected by the fact that President Emmanuel Macron's centrist coalition has been unable to gain an absolute majority", was the reaction of Commerzbank's FX analyst Ulrich Leuchtmann.
"In my view one can put it like this: The hope that some FX traders placed in Macron in 2017 evaporated some time back, so that election victories or defeats do not play a major role for the EUR exchange rates any longer", he explained.
There was some limited action on French government bonds with the spread with Germany's Bund increasing slightly but at a level than what is actually more favourable than last week:
"OAT-Bund spread 2 bps wider. Nothing to see here", Pictet's head of macro research Frederik Ducrozet commented on twitter.
Separately, data showed the CDS for France were actually one bp lower at the open this morning at 22.
Another area showing some kind of discount was the stock market where Paris' CAC 40 is trading with a 0.2-0.3 percentage point discount to the pan-European STOXX 600.
That being said, both indexes have been moving gently in and out of positive territory without any obvious signs of stress.
Within the equity space, the banking sector is probably where the French discount is most visible.
The euro zone banking sector is up 0.9%. BNP Paribas and Socgen are down 0.6% and 0.3%, while Credit Agricole is up 0.3%.
(Julien Ponthus)
STOXX VOLATILE, BUILDERS DOWN, CAC DIPS (0750 GMT)
European shares were off to a volatile start this morning with the STOXX 600 moving in and out positive territory in early deals, as investors assess the prospect of a political deadlock in France and policy tightening across major economies.
France's CAC 40 appeared to just slightly underperform the broader European market and was last down 0.1% after hitting a fresh low since early March 2022, while the pan-European equity benchmark gained 0.1%.
The STOXX Construction and Materials index stood out with a 2.5% drop after insulation specialist Kingspan said the mood in most markets deteriorated over the last 2 months and order intake fell significantly in May and June.
Its shares fell 12% to the bottom of the STOXX, dragging peers such as Saint Gobain, which declined 5%.
(Danilo Masoni)
NOT QUITE "TOGETHER" (0651 GMT)
On top of surging inflation, rising interest rates and growing global recession risks, markets in Europe are waking up on Monday to the prospect of heightened uncertainty in France -- the euro area's second biggest economy.
French President Emmanuel Macron is trying to salvage a ruling majority and his economic reform agenda after voters punished his centrist 'Ensemble' (Together) alliance in Sunday's parliamentary election.
While Ensemble secured the largest number of lawmakers in the 577-seat National Assembly, it fell short of the threshold required for an absolute majority in a vote that saw a leftwing alliance and the far-right perform strongly.
The euro has softened slightly and the premium investors demand to hold French 10-year government bonds over top-rated Germany widened to 57 basis points from 52 bps on Friday.
France now faces a period of prolonged political instability, while confronting an international crisis in Ukraine and the prospect of slowing growth at home.
Crypto currencies are also in the spotlight, highlighting that turmoil seen across world markets last week isn't over just yet.
Bitcoin fell below $20,000 over the weekend for the first time since December 2020. That level is of symbolic significance, as it was roughly the peak of the 2017 cycle.
Its hovering around $20,000 as early European trade gets underway but clearly sentiment is fragile. Bitcoin has lost 57% so far this year and 37% this month.
Asian shares meanwhile have been unable to sustain a rare rally as Wall Street futures shed early gains on worries the U.S. Federal Reserve would this week underline its commitment to fighting inflation with further large rate hikes.
European stock futures are flat to a touch higher.
A U.S. holiday means thinned-out trading conditions - a factor that could of course exacerbate volatility.
Key developments that should provide more direction to markets on Monday:
- China keeps lending benchmarks unchanged, wary of policy divergence risks
- U.S. markets closed on Monday for Juneteenth holiday
- Crypto industry gripped by anxiety as bitcoin wobbles near key $20,000 level
- China keeps lending benchmarks unchanged, wary of policy divergence risks
- German PPI +1.6% m/m, +33.6% y/y in May
- ECB President Christine Lagarde, ECB board member Fabio Panetta, ECB chief economist Philip Lane
EUROPEAN SHARES SEEN OPENING SLIGHTLY HIGHER (0646 GMT)
European shares are set to kick off the week up slightly as investors assess the impact of policy tightening across major economies and the results of legislative elections in France that saw President Macron loose his outright majority.
Euro STOXX 50, DAX and FTSE futures were last up around 0.2-0.7%, pointing to a stabilisation after three straight week of losses. Activity will likely be subdued as Wall Street is shut for a public holiday.
Over in Asia, shares slipped amid worries the Fed would this week underline its commitment to fighting inflation with whatever rate pain was required.
The euro showed little reaction after Macron lost control of the National Assembly in elections on Sunday, a setback that could throw the country into political deadlock.
(Danilo Masoni)
