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STOXX 600 up 0.2%
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Eyes on Fed's Powell
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John Wood rallies on takeover prospects
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U.S. stock futures inch higher
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BANKS SURGE AHEAD IN 2023 (1055 GMT)
The European index of banks is up 20% so far in 2023, compared to a 9% rise in the STOXX 600
For UBS equity analysts, this can be attributed to "strong macro revisions and a curve which implies higher near term policy rates and shallower rate cuts later".
Those factors are driving greater interest in the space, they say, along with banks delivering fourth quarter profits above consensus estimates.
They remain overweight on the sector, seeing "decent momentum in forecast for profits, capital generation and ROEs in the next quarter or two at least".
The analysts think any significant downside risks are mitigated by several factors. Those factors include low volumes of defaulted assets, sovereign guarantees on corporate credit granted during the pandemic, low bank risk appetite after the global financial crisis, and excess capital.
They add Commerzbank to their top picks list, removing Julius Baer and Deutsche Bank - though both remain buy-rated. BNP Paribas, ING , Lloyds Banking Group, Swedbank and UniCredit remain on the list.
Despite the sector looking good, the UBS analysts do flag recent guidance from UK banks: "FY23 NIM guidance from Barclays, LBG and NatWest are a reminder of what's ahead for all markets. Sooner or later asset yields reach a peak leaving rising deposit costs as the predominant driver of QoQ income levels".
(Lucy Raitano)
STOXX CREEPS UP (0919 GMT)
There was little conviction in early trading in Europe with traders refraining from big directional bets as they waited for Fed Chair Jerome Powell to provide more insight into the U.S. rate outlook in a testimony to Congress later in the day.
The region's STOXX 600 equity benchmark index was last a touch above parity, up 0.3% after earlier falling by as much as 0.2%, while sectoral moves were also muted. Real estate was the top gainer, up 0.8% and banks led fallers, down 0.2%.
Earnings releases were the biggest factor for stock moves. Hydrogen company NEL, biotech supplier Bachem and meal-kit maker Hellofresh all tumbled more than 4% after disappointing updates.
Well-received numbers drove fashion retailer Zalando and Bank of Ireland to the top of the STOXX.
M&A livened up the session for UK mid-caps. John Wood spiked as much as 17%. The oilfield services and engineering firm received another improved takeover offer from Apollo but said it was considering a rejection.
Here's your opening snapshot:
(Danilo Masoni)
EUROPE SIGNALS FLAT OPEN (0736 GMT)
Shares in Europe were expected to open broadly unchanged on Tuesday, after losses in Asia on weak China trade data and ahead of Federal Reserve Chair Jerome Powell's testimony to Congress that could offer insight into the central bank's next move on rates.
EuroSTOXX50 futures were last down 0.1% and FTSE 100 futures added 0.1% on another heavy day for earnings releases in the region, while contracts on the S&P 500 added 0.1%, signalling a cautious start on Wall Street later on.
In the corporate arena, meal-kit maker Hellofresh was set to fall at the open following a disappointing update. Bernstein said active customers in Q4 were a big miss and 2023 was weak.
Zalando was also expected to open lower after the online fashion retailer hit the lower end of its full-year target range and its outlook for 2023 was less than optimistic.
On a more upbeat note, Italian payments group Nexi confirmed guidance for 2023 and said transaction volumes accelerated in the first eight weeks of this year by 17%.
John Wood was also on the watchlist after the UK oilfield services and engineering company rejected the latest buyout proposal from private-equity firm Apollo, saying the new offer still undervalued the company.
Sticking with M&A, Australian investment bank Macquarie dismissed as speculation reports that it was exploring a takeover bid of about 5 billion pounds for British money manager M&G.
(Danilo Masoni)
DON'T FIGHT CENTRAL BANKS (0656 GMT)
Judging by the improved mood in global equity markets, investors are once again having a go at central banks.
Despite a slew of data from around the world showing stronger-than-expected performance in economies and labour markets - red signals for inflation - equities are on the mend.
MSCI's world index of global shares has recovered more than 2% this month after slipping 3% in February and erasing a huge chunk of January's 7% gain.
On Tuesday, Asian equity markets ticked up but the main focus of investors will be Federal Reserve Chair Jerome Powell's testimony before Congress on Tuesday and Wednesday.
Will Powell be able to send a decisive message to markets about the future pace of interest rate increases? That will be what markets zero in on.
Euro zone short-dated government bond yields extended gains and rose to their highest levels in 14 years on Monday after hawkish policy-maker Robert Holzmann called for four further 50-basis-point interest rate increases from the European Central Bank, while 10-year yields steadied.
The European Central Bank has already raised rates to 2.5%, a 3 percentage point increase since July and essentially promised another half a percentage point increase on March 16.
Investment managers are cautious on European stocks after their outperformance so far this year.
Strategists at BlackRock Investment Institute expect the trend to end as recent data pushes the European Central Bank to raise rates and keep them higher for longer.
While staying underweight on European stocks, it prefers financials, energy, healthcare and consumer discretionary sectors.
And Schroders' analysts are in the camp of those who expect interest rates to be kept on hold by the ECB from March.
Schroders noted in a report that replenishing of gas storage levels and falling energy prices reduce the need to raise rates further but says some of the reduced demand for energy in 2022 was due to mild winter weather and there was no guarantee of a repeat this coming winter.
Adding to more pain in the technology world, thousands of job cuts are in store at Meta Platforms, Bloomberg News reported on Monday, just a few months after the Facebook-parent slashed more than 11,000 people from its workforce.
On the corporate front, Bloomberg News reported that German chemicals distributor Brenntag is considering buying back at least 5% of its shares. This comes when the company is being urged by activist investors to break up and spin off its specialties unit and launch a share buyback programme.
Meanwhile, Australia's central bank raised its cash rate 25 basis points to the highest in more than a decade at 3.60% and said it expects further tightening will be needed to curb inflation.
Key developments that could influence markets on Tuesday:
European economic data: ECB consumer expectations survey, UK BRC Feb retail sales, Halifax house prices
Speakers: Fed chief Jerome Powell delivers semi-annual monetary policy testimony - 1500 GMT
U.S. economic data: January wholesale trade sales, consumer credit
(Anshuman Daga)
