EUROPEAN EQUITY OPEN: Stocks open moderately higher, supported by solid China PMI; German inflation data in focus ahead of Thursday's Eurozone release

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  OVERNIGHT: On Wall Street, stocks were choppy Tuesday after soft US data, hot Spanish and French inflation data, and month-end flows all at play; there was a sizeable sell-side market imbalance into the close, which saw the major indices close in the red (see here). APAC stocks were mostly positive as the region digested a slew of data releases (see here). From Australia, we saw weaker GDP growth and softer CPI; Westpac said that growth disappointed as domestic demand stalls amid high inflation and higher interest rates, while the downside surprise in CPI suggested that the inflationary pulse may be starting to ease. In China, the Manufacturing PMI saw its fastest pace of expansion in over a decade; Capital Economics said the data was exceptionally strong, and consistent with expectations for a rapid near-term rebound in Chinese economic activity.


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  EUROPEAN START: European equities have started the midweek session on a mildly constructive footing, with stocks rising after the open, supported by solid PMI data out of China. Corporate updates have been plentiful, once again. On the M&A front, Euronext (ENX FP) withdraws offer for Allfunds (ALLFG NA), while Belgium plans to sell down 2.7% stake in BNP Paribas (BNP FP). There have been a number of updates in the consumer sectors: Moncler (MONC IM) annual sales rose 25%, topping expectations, Puma (PUM GY) Q4 earnings were above expectations, Just Eat Takeaway (JET LN) ekes out profits in FY22. In the autos space, Porsche (P911 GY) will recall 51k Panamera models in China, Stellantis (STLAM IM/STLAP FP) CEO said the potential to take the Ram truck brand global, Aston Martin (AML LN) sales were above expectations in FY22. UK housing names are also in focus as the CMA starts study on homebuilding sector amid concern over costs and availability of housing, and elsewhere, Persimmon (PSN LN) warned on profits and slashed annual dividend 75%, while Purplebricks (PURP LN) launched formal sale process. In staples, Beiersdorf (BEI GY) sees lower FY23 sales, while Reckitt (RKT LN) sales slightly top FY estimates.


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  INFLATION: After hot data out of France and Spain, there is a lot of attention on German metrics, where the regions will report over the morning, before the aggregated data is out in the afternoon (expected to moderate to 9.0% Y/Y from 9.2%). So far, the bias is in keeping with the French and Spanish themes, tilting towards hotter price pressures; Bunds came under pressure after North Rhine-Westphalia reported annual CPI rising to 8.5% Y/Y from 8.3% in the state, casting some doubt over the consensus view for the national data. Banks have recently been revising up their estimates of how aggressive the ECB will be; Goldman Sachs Tuesday told its clients that it now sees a fourth 50bps rate rise in May (previously it was expecting +25bps), and now sees rates peaking at 3.75% in June (previously it was modelling 3.5%); the bank said it changed its view after comments from ECB chief economist Lane suggested inflation risks remained to the upside, while policy transmission may well be slower during this cycle, signalling more openness towards a further 50bps in May and a higher peak rate than in previous comments. GS adds that the data received this week have been firmer than expected, including the upside surprise in the Spanish and French inflation numbers, and re-acceleration in Euro area bank lending in January. The central bank's meeting minutes are due on Thursday (there is also flash inflation data out on Thursday, which could overshadow the minutes).

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: After prelim February inflation data for France and Spain came in hot relative to expectations, traders will be eying the German equivalents, ahead of the aggregate Eurozone flash HICP data (due Thursday); the rate of both German CPI and HICP are expected to moderate but remain elevated (HICP seen at 9.0% Y/Y from 9.2%). Final PMI manufacturing PMI data will be released over the course of the morning. BoE’s monthly credit stats are on the docket; BoE Governor Bailey will also be speaking today, and his speech will focus on the cost of living crisis.


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  US DATA/SPEAKERS: The ISM manufacturing survey for February is expected to show some improvement, but the headline is still likely to remain under the 50-mark (a more in depth preview is provided below); ahead of the ISM data, S&P Global’s final US manufacturing PMI for Feb will be released, providing a convenient preview for the ISM. Fed voter Kashkari will be speaking before the open.


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  ENERGY: The DoE weekly energy inventories are due; after hours Tuesday, the API reported crude stocks +6.2mln in the week (exp. +0.5mln), Cushing +0.5mln, gasoline -1.8mln (exp. +0.5mln), distillates -0.3mln (exp. -0.5mln).


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  SUPPLY: Germany will auction EUR 2.5bln of 2039 and 2038 Bunds. The UK will sell GBP 3.5bln of 2038 Gilts. Our full G7 bonds auction note can be accessed here.
  


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  US CORPORATE EARNINGS: Major US corporates reporting today include LOW and CRM; our daily estimates sheet can be accessed here. TSLA is hosting its investor day today, where it is expected to provide details about its cheaper, USD 25k vehicle.


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  PREVIEW – ISM MANUFACTURING (15:00GMT/10:00EST): The consensus is for the manufacturing ISM to improve a touch to 47.8 in February vs 47.4 in January. Credit Suisse is against that consensus view, and sees the index slipping to 47.0; the bank writes that although “momentum in the manufacturing sector is improving, the ISM has been a positive outlier, and likely has further room to fall before a modest rebound in the spring.” The bank notes that the S&P Global PMI data series and several Fed regional manufacturing surveys have stabilised recently, but the headline ISM will still be dragged lower by the production, employment and supplier delivery components. Ahead, the bank is more optimistic, and looks for the new orders component to bounce off the post-pandemic low of 42.5 seen in the January data. “US industrial production momentum is currently at a deep trough, and we expect a rebound in the months ahead,” CS writes, “some improvement in ISM new orders is likely this month, followed by a broader stabilisation in manufacturing surveys.” That said, it expects growth will remain sub-trend, with tighter financial conditions and poor sentiment limiting demand, and adds that elevated inventories will be a headwind for manufacturers.

STOCK SPECIFIC NEWS:

• Our full European equity specific briefings for March 1st can be accessed here and here.


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  COMMUNICATIONS: ProSiebenSat.1 (PSM GY) postpones publication of FY22 results in light of regulatory matters in connection with the business of Jochen Schweizer mydays.


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  CONSUMER CYCLICAL: Moncler (MONC IM) annual sales rose 25%, topping expectations; hiked prices 10% in Winter season, saw not adverse demand hit. Puma (PUM GY) Q4 earnings above expectations, sees FY23 profits are last year's levels amid costs. Adidas (ADS GY) upgraded at HSBC. Just Eat Takeaway (JET LN) ekes out profits in FY22, sees better performance in FY23. Porsche (P911 GY) to recall 51k Panamera models in China due to risk of electrical short-circuits and fire. Stellantis (STLAM IM/STLAP FP) CEO said the potential to take the Ram truck brand global was high; battery materials shortage may drive inflation. Aston Martin Lagonda (AML LN) sales above expectations in FY22. Pirelli (PIRC IM) upgraded at Goldman Sachs. Of note for homebuilders in the UK, CMA starts study on homebuilding sector amid concern over costs and availability of housing. Persimmon (PSN LN) warned on profits, slashed annual dividend 75%. Purplebricks (PURP LN) launches formal sale process, has received several credible expressions of interest.


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  CONSUMER STAPLES: Beiersdorf (BEI GY) sees lower FY23 sales after solid FY22. Reckitt (RKT LN) sales slightly top FY estimates.


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  ENERGY: Equinor (EQNR NO) to acquire equity interest in five discoveries in Troll, Fram and Kvitebjordn area. Saipem (SPM IM) awarded a USD 400mln offshore drilling contract.


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  FINANCIALS: Moonpig (MOON LN) and 888 (888 LN) are likely to be demoted from the FTSE 250 at the next quarterly reshuffle on 17th March, according to The Times. Swiss Life (SLGN SW) FY22 net profit rises 16%. ABN AMRO (ABN NA) upgraded at Berenberg. SFPI-FPIM plans to sell 33.3mln shares (~2.7% stake) BNP Paribas (BNP FP) shares at EUR 64.96 (vs EUR 66.15 close on Tuesday). Euronext (ENX FP) withdraws its indicative takeover offer for Allfunds (ALLFG NA).


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  HEALTH CARE: US FDA has approved Sanofi (SAN FP) and Regeneron's (REGN) Kevzara. Bayer (BAYN GY) submits Aflibercept 8 MG for marketing authorisation within Japan. Eurofins Scientific (ERF FP) FY adj. net income slightly short of expectations.


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  INDUSTRIALS: Airbus (AIR FP) CEO sees global demand for freighters, even after the pandemic. Ferrovial (FER SM) to get absorbed by Ducth unit, seeks listing abroad. Kuehne + Nagel International (KNIN SW) Q4 profit fell as economy slowed. Babcock (BAB LN) completes sale of its Aerial Emergency Services business. Wier Group (WEIR LN) sales and profits above expectations. Berenberg downgrades BAE Systems (BA/ LN), Dassault Aviation (AM FP).


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  MATERIALS: A US judge ordered Glencore (GLEN LN) to pay USD 700mln after guilty plea over a scheme to bribe foreign officials. Linde (LIN GY) boosts quarterly +9%. Givaudan (GIVN SW) downgraded at Morgan Stanley.


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  REAL ESTATE: Cellnex Telecom (CLNX SM) FY net loss narrows.


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  TECH: Atos (ATO FP) sees organic revue growth around flat in FY23. ASM International (ASM NA) sees Q1 revenue rising, targets capacity expansion. Amadeus IT Holdings (AMS SM) upgraded at Exane BNP. Ericsson (ERICB SS), Swisscom (SCMN SW) and AWS (AMZN) collaborate on 5G Core.


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  UTILITIES: UK Treasury is reportedly mulls U-turn on planned cuts to UK energy subsidies. Eni (ENI IM) downgraded at Exane BNP.

01 Mar 2023 - 08:10- Research Sheet- Source: Newsquawk