Newsquawk

EUROPEAN EQUITY OPEN: Indices open Friday trade with gains, but Euro stocks currently still on course for slight weekly losses; US PCE ahead

OVERNIGHT: On Wall Street, major indices firmed on Thursday, snapping a four-session losing streak and shrugging-off the sell-off seen in the NY morning after a knee-jerk hawkish reaction to the fall in initial jobless claims and upward revisions to Q4 Core PCE (see here). APAC stocks were mixed, trading mostly rangebound after the choppy performance on Wall St (see here); Nikkei outperformed as BoJ Governor nominee Ueda told a lower house hearing that current monetary policy was appropriate, and that Japan still needs more time for inflation to sustainably hit its target, adding that the BoJ would either need to move towards monetary policy normalisation or must consider ways to maintain YCC depending on if inflation improves significantly or not.

EUROPEAN OPEN: European equities are starting the last session of the week on the front foot, but as it stands, the broad Stoxx 600 and narrow Euro Stoxx 50 are still on course for small weekly losses. In stock specifics, materials will be in focus as BASF (BAS GY) Q4 earnings miss expectations, and it flagged an earnings decline and job cuts due to high costs in Europe; Holcim (HOLN SW) reported record performance for net sales, and said its CEO will take over as Chair in dual mandate role. In financials, Deutsche Bank (DBK GY) reportedly mulled Credit Suisse (CSGN SW) deal options last Autumn; separately, Credit Suisse (CSGN SW) expects a valuation adjustment for Real Estate Fund International against the backdrop of developments in underlying markets. Ahead, US PCE data will likely influence the global macro tone as the week closes out (preview in the day ahead section, below).

GERMAN DATA: The German GfK Consumer Sentiment data improved for a sixth straight month in March to -30.5 (exp. -30.4) from -33.8 in February, consolidating its upward trajectory. The survey compiler said that recent drops in energy prices and reports that experts believe a recession in Germany this year can now be avoided mean that optimism was slowly returning. But GfK added that the very low level of the indicator still means that private consumption will not be able to positively contribute to overall German economic growth this year. On that note the detailed German GDP metrics for Q4 were revised down to -0.4% Q/Q (vs an initially stated -0.2%), while the annual measure was revised down to +0.3% Y/Y (vs an initially stated 0.5%).

Our live day ahead calendar can be accessed here; a PDF version can be accessed here.

EUROPEAN DATA/SPEAKERS: The European data and speakers’ slate is quiet, with the only notable item a speech from BoE dove Tenreyro, who will speak on inflation targeting. After hours, ratings review from Fitch on the Netherlands (AAA), and Moody’s on Sweden (Aaa) are due.

NORTH AMERICAN DATA/SPEAKERS: US President Biden will continue his tour in Europe, and is expected to announce another wave of sanctions on Russia. The highlight on the data slate is the Personal Income and consumption data from the US, which also includes the PCE prices data, also known as the Fed’s preferred inflation gauge; we have a brief primer below. Elsewhere, final University of Michigan sentiment data for February will be published; the prelim report saw the headline rise to the highest since January 2021, support by current conditions, but sentiment was still at a weak level overall; the short-term inflation expectations measure ticked up, likely as gasoline prices also rose in the month, but the longer-term print was unchanged, which analysts suggest that consumer inflation expectations remain well anchored. On the speakers front, Fed non-voters Mester and Fed’s Collins will give speeches, as will Fed Governor Waller (voter). On the energy front, weekly rig count data from Baker Hughes will be published after the European close.

SUPPLY: Italy will sell between EUR 5.0-6.0bln of 2028 and 2033 debt, and will sell between EUR 3.0-3.50bln of 2028 CCTEUs.

US CORPORATE EARNINGS: Today’s major corporate earnings include EOG. Our full US daily corporate earnings estimates can be accessed here.

CORE PCE PREVIEW (13:30GMT/08:30GMT): The street expects core PCE to rise 0.4% M/M in January, matching the pace seen in December, while the annual rate is likely to ease to 4.3% Y/Y from 4.4%. The data will be read in the context of the hot CPI and PPI data for the month of January, which demonstrates that the road to normalising inflation will not be linear. The PPI and CPI data (combined with other measures of a solid economy, like the January jobs data and Services ISM) have raised fears around inflation releases, concerns supported by some consumer surveys which have recently shown a ticking up in short-term inflation expectations. “Core CPI continued to moderate in January, but much of the weakness was driven by components that don’t impact PCE estimates,” Credit Suisse says, “meanwhile, PPI inflation surprised on the upside, including a pickup in health care, air fares, and financial services, all categories which pass through directly into PCE calculations.” As an aside, analysts have been flagging up potential risks around revisions to the prior months' PCE data; Wrightson, for instance, notes that revisions to prior data, which could potentially provide a distorting factor to the annual Y/Y measures ("technical distortions resulting from last week's CPI seasonal factor revisions are likely to create a small but perverse upward bias in the Y/Y growth rate of the PCE Price index in the near-term", Wrightson writes).

COMMUNICATIONS: Cineworld (CINE LN) said it expects to emerge from Chapter 11 bankruptcy in the first half of this year.

CONSUMER CYCLICAL: Valeo (FR FP) EBITDA rises, targets strong slaes growth as it bets on car electrification. Amadeus (AMA SM) adj. profit rises, sees FY23 revenue growth of over 20%.

FINANCIALS: Deutsche Bank (DBK GY) reportedly mulled Credit Suisse (CSGN SW) deal options last Autumn. Separately, Credit Suisse (CSGN SW) expects a valuation adjustment for Real Estate Fund International against the backdrop of developments in underlying markets. Jupiter Fund (JUP LN) said macro events had significantly impacted market valuations, investor sentiment, results, and te environment looks set to remain uncertain in the near-term.

HEALTH CARE: Sanofi (SAN FP) said new data for tolebrutinib, an investigational brain-penetrant BTK inhibitor, showed significant effect on CNS immune mediators that drive MS disease progression.

INDUSTRIALS: Of note for Airbus (AIR FP), US competitor Boeing (BA) halts deliveries of 787 Dreamliner over documentation issue, FAA said, but production continues, and Boeing does not tweak guidance. IAG (IAG LN) saw a return to profits in FY22. Saint Gobain (SGO FP) FY22 sales rise. Bucher (BUCN SW) net sales in line with expectations, slip slightly Y/Y. Leonardo (LDO IM) CEO said European nations have become far more prepared to invest in defence following the Ukraine war.

MATERIALS: BASF (BAS GY) Q4 earnings miss expectations, flags earnings decline, job cuts due to high costs in Europe. Holcim (HOLN SW) reported record performance for net sales, CEO to take over as Chair in dual mandate role.

UTILITIES: UK HSE drops health and safety case against Drax (DRX LN) after additional information was provided. Endesa (ELE SM) net profits rise.

24 Feb 2023 - 08:10- Research Sheet- Source: Newsquawk