Newsquawk

EUROPEAN EQUITY OPEN: Stocks open lower amid a hawkish monetary policy theme, but still on course to finish the week with gains

EUROPEAN OPEN: Despite a soft start to Friday trading, European equities are currently on course for weekly gains, snapping the downside seen last week. The lead from Wall Street is being cited as recent data points raise fears of a more hawkish Fed, and in that vein, this morning, wires have been running headlines suggesting Goldman Sachs has upped its US rate hike view, now sees three further 25bps hikes from the Fed in March, May and June, taking its view of the terminal rate to 5.25-5.50%; the bank raised its forecasts owing to stronger growth and firmer inflation news. More domestically, ECB’s Schnabel has been talking about how weak monetary policy transmission in Europe may require more aggressive ECB policy. On the data front, UK retail sales data rose but the outlook is still glum, while German producer prices did not fall as much as expected in January; we recap both prints below.

GERMANY PPI: German Producer Prices fell in January, printing -1.0% M/M from a prior -0.4%, although this was not as deep as the -1.6% M/M the street was expecting. The annual rate for producer prices eased to +17.8% from 21.6%, but once again, was not as deep as the street was modelling (exp. 16.4%); and accordingly, Bund futures declined by around 20-25 ticks in wake of the data.

UK RETAIL SALES: UK Retail Sales rose +0.5% M/M in January (exp. -0.3%), seeing the annual rate of decline pare to -5.1% Y/Y (exp. -5.5%) from -6.1% Y/Y previously. Capital Economics said 2023 may be better than 2022 for the UK's retailers, but it will still be a struggle. "On the face of it, these data add to the view that activity is holding up fairly well, but there are two reasons not to get too carried away," CapEco writes: 1) retail sales were very weak last year, but overall consumer spending held up due to stronger non-retail spending; "when households’ finances are under pressure, it possible that any improvement in retail sales will be just be met by a softening in non-retail spending," the consultancy writes. 2) The full drag on activity from higher rates has yet to be felt (albeit, it adds that the largest falls in real incomes are now behind us). "As such, it is too soon to conclude that the retail sector is coming out of its funk and that the economy won’t yet fall into a recession."

The data slate quietens down on Friday the European docket includes Current Account data for December; there are no scheduled ECB speakers. Options traders will note expiries for FTSE 100, Euro Stoxx 50, DAX 40 and CAC 40 February options. For the US Day, January import and export prices, and the leading index for January; from Canada, PPI and RMPI data for January is due. Fed Governor Bowman and 2024 voter Barkin will be speaking before the cash open. After hours, Moody's may review Switzerland's Sovereign Debt Rating (currently Aaa), and S&P may review Poland's rating (A-). Our full Day Ahead calendar can be accessed here; a PDF version can be accessed here.

Our full European Equity briefings for February 17th can be accessed here and here.

COMMUNICATIONS: Proximus (PROX BB) EBITDA rises in Q4 in line with expectations. Ubisoft (UBI FP) Q3 net bookings 726mln (exp. 776mln); FY22/23 and 23/24 guidance confirmed.

CONSUMER DISCRETIONARY: Mercedes-Benz (MBG GY) sales and profits topped expectations in Q4, but warned of market uncertainty in 2023. Hermes (RMS FP) sales top analyst expectations.

CONSUMER STAPLES: Heineken (HEIA NA) will purchase EUR 1bln of shares from FEMSA.

ENERGY: Aker ASA (AKER NO) per share NAV decreases, proposes NOK 15 dividend.

FINANCIALS: Allianz (ALV GY) swings into Q4 profit; Pimco had around EUR 10bln inflows in January. NatWest Group (NWG LN) profit jumps after boost from rate rises. ABN AMRO (ABN NA) appoints Ferdinand Vaandrager as interim CFO from May. Credit Suisse (CSGN SW) Singapore CEO departs to pursue outside interests. Keefe Bruyette upgrades Banco BPM (BAMI IM), BPER (BPER IM) and Intesa Sanpaolo (ISP IM). Direct Line (DLG LN) downgraded at RBC.

HEALTH CARE: Valneva (VLA FP) and Pfizer (PFE) discontinue a significant number of participants in its VALOR Phase 3 clinical study following violations of GCP. Bayer (BAYN GY) reconfirms favourable safety profile for Darolutamide. Former Serco Group (SRP LN) chief Rupert Soames to succeed Roberto Quarta as Chair of Smith + Nephew (SN/ LN). Recordati (REC IM) downgraded at Barclays.

INDUSTRIALS: Safran (SAF FP) revenue and operating income above expectations, dividend light, but sees recurring operating income of EUR 3bln. Air France (AF FP) reported robust bookings, expects higher margins ahead. Kingspan (KSP LN) FY profit rises in a 'bumpy year'. Randstad (RAND NA) downgraded at Barclays.

REAL ESTATE: Segro (SGRO LN) profits lower than expected in FY22. British Land (BLND LN) downgraded at Numis. British Land (BLND LN) downgraded at Numis.

TECH: Eutelsat (ETL FP) misses profit estimates on higher costs and weak broadband revenues.

UTILITIES: Uniper (UN01 GY) reported deeper than expected net income loss, expects volatile 2023 as gas prices remain uncertain. EDF (EDF FP) sees record loss after lower nuclear output.

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