European Benchmarks Off Best Levels, Still Firmer On The Day

The move away from best levels in core global bond markets and perhaps some feed through from the heavy showing for Chinese indices pushes European equity benchmarks back from best levels.

• The space had initially benefitted from fresh record highs on Wall St. at the tail end of last week and a move lower in German yields (on a top line level).
• That leaves the Euro Stoxx 50 +0.6% in cash trade, while the futures equivalent is 0.7% higher on the day.
• Sector-wise, IT, financials and industrials outperform on the Stoxx 50, while utilities see the most pronounced losses.
• M&A deals surrounding Kindred (to be bought by La Française des Jeux) and Worldline (7% acquired by Credit Agricole) have dominated regional equity news flow thus far.
• Elsewhere, local reports have suggested that Italy is considering selling as much 20% of Poste Italiane, with the government looking to raise as much as EUR2.5bn.
• Technically, Euro Stoxx 50 futures breached support at the Jan 5 low (4,444.0) last week, trading to a low of 4,402.00. The contract has since recovered and last week’s base represents a key short-term support. A break of this level would resume bearish pressure and open the Nov 28 low (4,370.00). Initial resistance to watch is the Jan 11 high (4,536.00), which went unchallenged today (high of 4,519.00). Clearance of this level would highlight a potential reversal and a resumption of the primary uptrend.