Newsquawk

EUROPEAN EQUITY OPEN: Indices open flat; US PCE ahead; focus will start shifting onto next week's ECB, BoE and Fed meets

OVERNIGHT: Stocks on Wall Street rose on Thursday after higher-than-expected Q4 GDP data, and declining initial jobless claims, supporting hopes of a soft US economic landing (see here). Asia traded with a slight positive bias after strong US data, but with gains capped as attention turned to earnings and firm Tokyo inflation (see here).

EUROPEAN START: European equities start the last trading day of the week on a flat footing, and the broad Stoxx 600 and narrow Eurostoxx 50 gauges of blue chips are on course to eke out gains for the week, though have not made any progress in taking out last week’s highs. The earnings docket has been heavy, with luxury giant LVMH (MC FP) defying the downturn with record profits and a dividend hike, although some reports point to lower margins as a blemish. other fashion-focussed consumer cyclicals – like Salvatore Ferragamo (SFER IM) and H&M (HMB SS) – were less upbeat. Tech names will be eyed after a weak update and outlook from semiconductor Intel (INTC), while from the supply front, Japan and Netherlands are set to join the US on China chip curbs. Elsewhere, energy names will also be watched today, as Chevron (CVX) begins the reporting season for US oil majors. After the morning part of the session, traders will begin focussing on US PCE data which will inform expectations about the progress of capping inflation; next week’s central bank events will also come into focus, with the ECB, BoE and Federal Reserve meetings all due.

DAY AHEAD:

EUROPE DATA: The docket is thin, with only money supply data due. On the speakers front, ECB's Lagarde is scheduled to deliver remarks, however, she is unlikely to talk about current policy given that the central bank is in its pre-meeting blackout window, and her remarks will be focussed on international holocaust remembrance.

US DATA: The main focus will be on the US PCE data for January, which is expected to show core PCE rising 0.3% M/M (prev. 0.2%), with the annual core rate expected to pare back to 4.4% Y/Y from 4.7%. We preview the data in a little more detail below. Meanwhile, the Personal Income is likely to rise 0.2% in the month, while Personal Spending is likely to fall by 0.1%. Elsewhere, the final University of Michigan consumer confidence data for January is expected to confirm the 64.6 reading in the flash data; as always, there will be attention on the inflation expectations components, after the flash data showed one-year inflation expectations rising by 0.1ppts to 3.0%, although the longer 5-10yr measure eased to 4.0% from 4.4% in December.

US PCE PREVIEW (13:30GMT/08:30EST): Core PCE is seen rising +0.3% M/M (prev. 0.2%), with the annual core rate expected to pare back to 4.4% Y/Y from 4.7%. Analysts are looking for a broad deceleration in core goods and services prices; the primary upside pressure in the core measure is likely to come from shelter. As a comparison, the consumer prices data for December showed core CPI rising 0.3% M/M, picking up slightly from the 0.2% pace in November; the annual rate pared back to 5.7% Y/Y from 6.0%, with the largest contributions to the upside from rents and hospital services; on the other side, used vehicle prices moderated strongly. It is worth noting that these data will be released during the Fed's blackout window ahead of the January 31-February 1st FOMC meeting; the current base case implied by both market pricing and analyst forecasts is that the central bank will lift rates by 25bps. However, many have caveated that view around incoming data, suggesting that if there is an upside surprise within the PCE data, then pricing for 50bps could pick up once again.

EARNINGS: Today's US corporate earnings highlights are: Chevron (CVX), HCA Healthcare (HCA), Colgate Palmolive (CL), American Express (AXP), Charter Communications (CHTR). Full earnings expectations can be accessed here. Our full daily earnings estimate sheet can be accessed here.

STOCK SPECIFIC NEWS:

COMMUNICATIONS: JC Decaux (DEC FP) reported higher FY revenues, said transport remained meaningfully impacted in China, which is still struggling with COVID measures. JC Decaux (DEC FP) was upgraded at Barclays. Ionos seeks market cap of 3.14bln at IPO; United Internet (UTD GY) total proceeds expected between EUR 447-543mln. Scor (SCO FP) appointed Thierry Leger as CEO.

CONSUMER CYCLICAL: LVMH (MC FP) reported Q4 sales up 9%, with Europe and US customers continuing to spend, which offset COVID-related disruptions in China. Salvatore Ferragamo (SFER IM) sales were up, but it attributed the slowdown in Q4 to COVID disruptions in China. H&M (HMB SS) Q4 operating profits missed consensus expectations due to "negative external factors". Superdry (SDRY LN) sees FY23 adj. PBT to broadly breakeven. Renault (RNO FP) reportedly proposed increasing its salary budget by 7.5% in 2023. DeLonghi (DLG IM) prelim FY22 revenue was a little higher than expected, but it warned of a slight decrese in sales in FY23.

CONSUMER STAPLES: Bestway Group to acquire 3.4% of Sainsbury’s (SBRY LN) share capital. Danone (BN FP) will explore strategic options for its organic dairy activity in the US, including a potential sale. Remy Cointreau (RCO FP) Q3 sales declined by less than expected amid a rebound in China. Flutter Entertainment (FLTR LN) downgraded at JPMorgan Chase.

ENERGY: TotalEnergies (TTE FP) Canada unit acquires an additional interest in Fort Hills, ahead of its planned spin-off. CGT Union said strikes at TotalEnergies (TTE FP) sites have been suspended, will be proposed again on January 31st. Equinor (EQNR NO) upgraded at Goldman Sachs. Aker BP (AKERBP NO) Q4 update noted net volume sold in Q4 was 428.3mln BOEPD. Enagas (ENG SM) buys additional 4% stake in Trans Adriatic Pipeline for EUR 170mln.

FINANCIALS: Direct Line (DLG LN) CEO to step down. Banca Monte dei Paschi (BMPS IM) upgraded at Barclays. Credit Suisse (CSGN SW) upgraded at Morgan Stanley.

HEALTH CARE: US Democrat Senator Warren expresses concern over Indivior's (INDV LN) plan to buy Opiant (OPNT). Philips (PHIA NA) reportedly cuts headcount by 1k in the Netherlands. Sanofi's (SAN FP) Dupixent recommended for expanded EU approval by the CHMP. Ipsen (IPN FP) receives CHMP negative opinion for Palovarotene. Signify (LIGHT NA) raised 2023 outlook on profitability margins.

INDUSTRIALS: Rolls-Royce (RR/ LN) new CEO delivered a bleak assessment to employees, said the company underperforms every key competitor. Airbus (AIR FP) intends to hire over 13k staff worldwide this year. Airbus (AIR FP) downgraded at Jefferies. Air France (AF FP) places order with Airbus (AIR FP) for four A350F and three A350-900. German union Verdi exends strike at Deutsche Post (DPW GY). Travis Perkins (TPK LN) downgraded at Exane BNP. Siemens (SIE GY) downgraded at Berenberg. Geberit (GEBN SW) upgraded at Exane BNP. Aena (AENA SM) upgraded at Barclays.

MATERIALS: SSAB (SSABA SS) Q4 revenue was above expectations, profits below, took a charge in the quarter, and sees continued uncertainty ahead. HeidelbergCement (HEI GY) upgraded at Exane BNP. Antofagasta (ANTO LN) downgraded at Peel Hunt.

TECH: Intel (INTC) shares fell 9.7% after the US close, as earnings missed forecasts and it provided a weak outlook. Elsewhere, Japan and the Netherlands to join US on China chip curbs.

27 Jan 2023 - 08:10- Research Sheet- Source: Newsquawk