European Stocks Bounce After Flash Crash as Traders Eye Policy

(Bloomberg) -- European equities recovered slightly after a flash crash sent shares tumbling on Monday, as investors shifted their attention to the monetary policy outlook ahead of the Federal Reserve meeting.

The Stoxx 600 Europe Index added 0.5% by the close in London, following a volatile session. Energy, automakers and banks were in the lead, while real estate underperformed. BP Plc shares climbed after the oil major boosted its share buyback by $2.5 billion as cash flow surged. BNP Paribas SA jumped after reporting gains in both equities and fixed-income trading.

READ: Citi's Painful Flash Crash Highlights Market Risks From Algos

The European benchmark is rebounding, in the aftermath of Monday's flash crash, as a trader at Citigroup Inc.'s London desk made an error inputting a transaction, sparking an abrupt selloff across European equities that briefly wiped out 300 billion euros ($315 billion).

European equities have been under pressure this year on concerns about aggressive rate increases, surging inflation and the risks to growth from the war in Ukraine. Investors are bracing for the Federal Reserve meeting on Wednesday, where the U.S. central bank is poised to announce its biggest rate hike since 2000, while the U.K. is expected to raise borrowing costs a day later.

“The main event for the week is the Fed meeting tomorrow and I have the impression that the market is now well prepared and has anticipated the move,” said Alberto Tocchio, a fund manager at Kairos Partners. “Global positioning is now very downbeat, actually very similar to the conditions we had before the March 2022 technical rally. All these signals are telling us that there is a high probability of a reversal with another technical bounce similar to what we had in March.”

The European earnings season has been broadly reassuring so far but has failed to push prices higher in April, and the region's equities have suffered from continuous fund outflows.

“After a lukewarm start to the reporting season, things have improved in recent days and we now see some 56% of companies having beaten estimates and 26% having missed,” Morgan Stanley strategists including Ross MacDonald wrote in a note. “This gives a net beat of 30% of companies, which is a robust outcome and comparable to the beat delivered in the fourth quarter of 2021.”

Others are less positive.

“We are not more bullish because of central banks wanting to reduce demand, we think earnings will not be as high as analysts expected, we think they will be probably only slightly positive, and that there will have to be some market repricing,” Stephane Monier, chief investment officer at Banque Lombard Odier, said on Bloomberg TV. “There are still a lot of uncertainties in the market.”

MARKETS

Equities: Euro Stoxx 50 up 0.8%, FTSE 100 up 0.2%, DAX up 0.7%, CAC 40 up 0.8%, FTSEMIB up 1.6%, IBEX 35 up 1.8%, AEX-Index up 1.7%, Swiss Market Index up 0.3%
Bonds: German 10-year-yield down 1bps at 0.95%, Italian 10-year-yield unchanged at 2.87%, Spanish 10-year-yield unchanged at 2.01%
Credit: iTraxx Main down 2.0bps at 88.2, iTraxx Crossover down 8.1bps at 419.5
FX: Euro spot up 0.28% at 1.0536, Dollar index down 0.38% at 103.34
Commodities: Brent crude down 1.4% at $106.1/bbl, copper down 3.5% at $9,430/MT, iron ore down 1.7% at $141.05/MT, gold up 0.6% at $1,873.76/oz

EUROPE EQUITIES

14 out of 20 Stoxx 600 sectors rise; autos sector has the biggest volume at 99% of its 30-day average; 378 Stoxx 600 members gain, 217 decline
Top Stoxx 600 outperformers include: ISS +13.6%, Raiffeisen Bank International +7.0%, Electrolux +6.1%, Temenos +5.8%, BP +5.8%
Top Stoxx 600 underperformers include: Segro -10.3%, Tritax Big Box -8.6%, MIPS -7.7%, Warehouses De Pauw CVA -5.9%, Avast -5.7%
For a daily wrap highlighting the biggest movers among EMEA stocks, click here
You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Action