EUROPEAN EQUITY OPEN: Indices open lower, eye mixed end to the week; Adidas (ADS GY) cuts outlook, regulators monitoring Credit Suisse (CSGN SW), First Abu Dhabi Bank not mulling offer for Standard Chartered (STAN LN)

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  OVERNIGHT: Wall Street turned around early gains and slumped to losses amid risk off trading conditions, and the yield curve inversion deepened (see here). And Asian stocks traded mostly lower after the downbeat lead from US peers (see here).


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  EUROPEAN OPEN: The mood is downbeat at the end of the week, following negative leads from Wall Street and Asia trading mostly lower. The narrow Euro Stoxx 50 is currently on course to finish the week slightly lower after two weeks of gains, although the broad Stoxx 600 is on course for a third week of gains. Friday’s European pre-markets have seen slightly better than expected GDP data out of the UK, which managed to avoid recession in Q4, although the outlook remains glum (see below for more). Traders have also been digesting a Nikkei report that said the government will likely nominate Kazuo Ueda next week as the new BoJ Governor, considered to be more hawkish than the widely touted current BoJ Deputy Governor Amamiya, who apparently refused the job. That has seen the JPY surge against the USD and EUR, and through the channels, has resulted in upside for EUR/USD (see here). Elsewhere, it has been another busy slate for European corporate news, with earnings and news flow to note (as usual, we recap below). In cyclicals, Adidas (AS GY) lowered guidance, though L’Oreal (OR FP) gave a more constructive update. There have been a lot of updates in the banking sector, with First Abu Dhabi Bank denying reports that it was mulling an offer for Standard Chartered (STAN LN); Barclays (BARC LN) is reportedly being probed by UK regulators over compliance failings; Swiss regulators are watching Credit Suisse (CSGN SW) closely after recent significant outflows; the Dutch will reportedly sell down part of its holdings in ABN AMRO (ABN NA) to just under 50% from 56%.


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  UK GDP REVIEW: UK GDP was softer than expected in December, printing -0.5% M/M (exp. -0.3%). ONS said some of the downside in December was attributable to industrial action. The annual change was -0.1% Y/Y, slightly better than the expected -0.2%. The economy saw no growth or contraction in Q4 (BoE was forecasting +0.1%), which means that the UK avoided falling into a recession, by the technical definition at least. Capital Economics said the breakdown suggests households and businesses were resilient, stating that “it seems as though the combination of the government’s support and households/businesses using their cash reserves has so far cushioned the blow from the fall in real incomes.” But Capital Economics warned that avoiding a UK recession in 2023 will prove to be more challenging: “given that the drags from high inflation and high interest rates are very large (and we estimate that only one third of the drag from higher rates has been felt so far), we still think the economy will enter a recession this year.”

DAY AHEAD:

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


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  EUROPEAN DATA/SPEAKERS: EU leaders will be holding a second day of discussions on the US Inflation Reduction Act. The ECB will publish repayment data for the TLTRO.III, which is expected to be around EUR 447bln; analysts will be keeping an eye on whether the new ceiling on remuneration will have any impact on bank's desire to repay early or not (though it is effective from May). ECB’s Schnabel will be conducting a Q&A on Twitter, but we don’t expect her to add anything incremental to recent remarks; she has recently expressed concern that inflation will remain too high in the medium-term, and the momentum of price pressures remains elevated, leaving her unable to give an all clear just yet. The Bank of England’s Chief Economist Pill has spoken heavily in wake of the MPR, so we are not expecting anything majorly incremental from him when he delivers remarks. After hours, Moody’s may review Germany ratings (AAA), and S&P may review Swiss ratings (AAA).


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  NORTH AMERICAN DATA/SPEAKERS: The data highlight is the prelim University of Michigan sentiment data for February, where the headline and expectations components are expected to register slight improvement, although the current conditions measure is seen a little lower; as has been the case for many months, traders will closely be watching the inflation gauges within the data. Fed Governor Waller will give another set of remarks; earlier in the week, he said the Fed’s job on inflation was not done yet, and it might be a long fight, with rates possibly staying higher for longer than many expect. Fed 2023 voter Harker will speak, but is talking about digital currencies, so is unlikely to have any specific comments on current policy or outlook. Elsewhere, the weekly Baker Hughes rig count data will be published. The Loonie watchers will be eying Canada’s January jobs data, where the pace of employment additions are expected to cool and the jobless rate is seen ticking up slightly.


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  CORPORATE EARNINGS: There are no major US corporate earnings due Friday. Full earnings expectations can be accessed here.

STOCK SPECIFIC NEWS:

• See here and here for our full European equity news briefings for February 10th.


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  COMMUNICATIONS: Swisscom (SCMN SW) upgraded at Berenberg.


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  CONSUMER CYCLICAL: Adidas (ADS GY) lowers 2023 outlook, warned it faces loss if it cannot sell remaining stock of Yeezy trainers. Adidas (ADS GY) downgraded at Jefferies. L'Oréal (OR FP) sales growth was above expectations despite weakness in China. Saab (SAABB SS) sales top estimates, operating profit rises, sees 15% sales growth in FY23. Smurfit Kappa (SKG LN) downgraded at JPMorgan Chase. HelloFresh (HFO GY) downgraded at JPMorgan. InterContinental Hotels (IHG LN) downgraded at Stiefel.


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  ENERGY: AkerBP (AKERBP NO) profits surge, lifts dividend. France considers using proceeds from a centuries-old savings account to help finance a EUR 50bln project for six nuclear reactors. Morgan Stanley upgraded Equinor (EQNR NO), downgraded Shell (SHEL LN).


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  FINANCIALS: First Abu Dhabi Bank said it was not evaluating an offer for Standard Chartered (STAN LN). Barclays (BARC LN) is reportedly being probed by UK regulators over suspected persistent compliance failings, and anti-money laundering procedures. Swiss regulator FINMA said Credit Suisse (CSGN SW) outflows in Q4 were "indeed significant", monitors banks very closely in these situations.  The Dutch state intends to sell part of its holdings in ABN AMRO (ABN NA), taking its stake to just under 50% from 56%. Saga (SAGA LN) confirms that it is in exclusive talks with Open Insurance Technologies around a potential sale of Acromas Insurance. NatWest (NWG LN) will stop offering loans to new customers looking to fund O&G exploration, extraction or production. Euronext (ENX FP) sales rose Y/Y, has no plans to follow rivals with cloud computing deals. UK insurers will note that the Treasury is in talks to hasten Solvency II reforms. UnipolSai (US IM) FY profits fall. abrdn (ABDN LN) downgraded at HSBC.


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  HEALTH CARE: FDA Advisory Committee votes in support of GlaxoSmithKline (GSK LN) trials designed to evaluate Jemperli as a potential treatment for rectal cancer. Phase III data show Roche (ROG SW) Vabysmo rapidly improved vision and reduced retinal fluid in people with RVO; separately, Roche (ROG SW) Foundation acquired 540k bearer shares. Evotec (EVT GY) receives a EUR 150mln loan from EIB. Carl Zeiss (AFX GY) sees EBIT margin lower in FY23.


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  INDUSTRIAL: Siemens (SIE GY) shareholders approve dividend proposal of EUR 4.25/shr. Korean Air's (003490 KS) bid for Asiana (020560 KS) to face a full-scale EU antitrust probe. Hochtief (HOT GY) downgraded at Kepler.


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  MATERIALS: ArcelorMittal (MT NA) upgraded at Deutsche Bank.


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  UTILITIES: Enel (ENEL IM) FY core profits better than expected.

10 Feb 2023 - 08:10- Data- Source: Newsquawk