EUROPEAN EQUITY OPEN: Stocks open with a degree of caution ahead of Powell and Lagarde at Jackson Hole

EUROPEAN OPEN: The Euro Stoxx 50 gauge of European blue chips is on course for a second straight week of losses, though the broader Stoxx 600 index is on course for some modest gains. European equities are starting the last trading day of the week with losses, though the pre-market downside in futures contracts were pared back after headlines said China was issuing nationwide guidance on the easing of mortgage rules (see here). Closer to home, German GDP data for Q2 was unrevised, dispelling some concerns that a negative revision might drag down the aggregated Eurozone growth stats (see below for analysis). Bunds have eased in wake of the data, while traders will eye the Ifo survey later in the morning. In the UK, Gfk consumer confidence improved in August, in contrast to some of the other gloomier data out of the UK of late (see below for analysis). The main focus today is Fed Chair Powell and ECB President Lagarde’s appearances at the Kasnas City Fed’s Jackson Hole Economic Symposium; we provide previews for both below. 

STOCK SPECIFICS: Of note for Watches of Switzerland (WOSG SW), and other luxury names, Rolex is to buy Bucherer, which some analysts say may have retail implications on Watches of Switzerland. In the automakers sector, Mercedes-Benz (MBG GY) is reportedly considering EV charging stations in Japan, while Aston Martin (AML LN) was upgraded to Buy from Hold at Jefferies. European retailers will note earnings from US peer Gap (GPS), whose shares rose 1.5% following mixed results, and despite reporting declining sales across all brands and warning of "uncertain consumers". In communications technology, Ericsson (ERICB SS) and China's Huawei renew their global patent license agreement; Ericsson estimates FY23 IPR licensing revenues to be approx. SEK 11bln. Of note for UK utilities, the Ofgem Energy Price Cap was lowered -7.3% to GBP 1,923 (prev. 2,074) for dual-fuel households between October-December. It is the first time that UK average energy bills have fallen below GBP 2,000 since April 2022. Our full European equity briefings for August 25th can be accessed here and here.

GERMANY GDP: The detailed release of Q2 GDP was unrevised at 0.0% Q/Q (exp. 0.0%, flash 0.0%), confirming that the German economy came out of recession after contracting in Q4 and Q1. Analysts said the data was somewhat at odds with survey data and other hard data in Q2, though the economy was only able stagnate, as opposed to mustering any growth. Destatis highlighted that developments were mixed across sectors. Nevertheless, the unrevised number bodes well for the upcoming revision to the Eurozone Q2 growth metrics - some were concerned that a negative German revision might weigh on the wider Eurozone data.

UK CONSUMER CONFIDENCE: UK GfK Consumer Confidence improved to -25.0 in August (exp. -29.0, prev. -30.0), with the survey compiler noting that the mood became more constructive amid lower inflation. "While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK." Reports note that the improvement in the GfK survey contrasts with other recent downbeat data on consumer spending.

TODAY’S AGENDA:

• Our interactive calendar can be accessed here; a pdf version can be downloaded here.


• 
  EUROPEAN DAY: The German Ifo survey for August is likely to show declines in the business climate and current conditions, though future expectations are seen improving a little. ECB's Lagarde will make an appearance at Jackson Hole, speaking well after the European close (around 8pm London time). On the CRA front, Moody's Ratings may update on Sweden's credit rating (currently Aaa).


• 
  US DAY AHEAD: Fed Chair Powell's opening remarks from Jackson Hole are the highlight (see below). Before then, the University of Michigan's Final August sentiment data will be released. Baker Hughes Weekly Rig Count data will be released in the afternoon.


• 
  POWELL AT JACKSON HOLE: Traders will be looking for clues from Chair Powell as to whether the Fed is near the end of its hiking cycle; Powell is likely to endorse a data-dependent approach, while emphasising the resilience of the US economy. Traders will also be looking to his remarks for any commentary on the r-star rate, to see if Fed officials think this has moved upwards, and whether that implies a higher-for-longer monetary policy outcome. Powell may skirt any near-term guidance on rates, choosing not to pre-judge the outcome of the September FOMC; analysts also think that he may highlight that even when the Fed is done with hikes, policy rates will remain in restrictive territory for some time. Our full Jackson Hole primer, previewing speeches from ECB President Lagarde as well as Fed Chair Powell can be accessed here; a full schedule of events can be accessed here.


• 
  LAGARDE AT JACKSON HOLE: With several weeks until the ECB announcement, and ahead of next week’s key August flash HICP data, President Lagarde has very little to gain by pre-empting the September 14th confab, or the October 26th meeting, reiterating data-dependence. Referring back to the July meeting, and awaiting the September macroeconomic projections will likely underpin her speeches. Our full Jackson Hole primer, previewing speeches from ECB President Lagarde as well as Fed Chair Powell can be accessed here; a full schedule of events can be accessed here.

25 Aug 2023 - 08:10- Research Sheet- Source: Newsquawk