EUROPEAN EQUITY OPEN: Stocks start on a downbeat note following hotter-than-expected inflation data out of France and Spain

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  OVERNIGHT: On Wall Street, stocks closed off highs, finding support from the move lower in US rates, paring some of the post-PCE move on Friday (see here). APAC stocks failed to sustain the initial momentum, with a flimsy risk tone seen at month-end amid mixed data releases. Australia reported a stronger-than-expected rebound in retail sales, while Japanese releases were mixed, including the largest monthly decline in industrial production in 8 months; BoJ Deputy Governor nominees reiterated the need to continue monetary easing; Chinese stocks failed to sustain early upside despite a firm liquidity operation by the PBoC, amid reports that the White House is scaling back plans to regulate US investments in China (see here).


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  EUROPEAN OPEN: Stocks started Tuesday trading on a downbeat note following firmer than expected inflation data out of France and Spain, which resulted in yields ticking up in the fixed income complex, injecting some hawkishness into the implied path of ECB rates ahead. Before the data was released, ECB chief economist Lane was noting that forward looking indicators for food, energy and goods inflation suggests a slowdown; on the rates front, Lane said that once terminal has been reached, rates should be held at that plateau for some time, and could be in restrictive territory for a number of quarters, while hikes would only end once it was clear that inflation was heading to target. There is not too much ahead in terms of scheduled releases, leaving traders to continue to digest inflation data ahead of Germany’s release on Wednesday and the Eurozone aggregate data on Thursday (ECB meeting minutes also released Thursday). Some commentary from BoE officials is due, but are not expected to shift the dial too much; UK focussed traders will also be monitoring Brexit news flow, with the DUP leader Donaldson stating the Stormont Break in the Northern Ireland deal, at a first glance, does give Stormont the ability to apply the break, and although he continues to have some concerns with the deal.


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  INFLATION: German Import Prices rose to 6.6% Y/Y in January, easing from 12.6%, but above the expected 6.3%. French prelim February inflation data was firmer than expected, with HICP rising to 7.2% Y/Y (exp. 7.0%, prev. 7.0%); The national gauge of CPI rose to 6.2% Y/Y in February (exp. 6.1%, prev. 6.0%). French producer prices for January rose by 2.7% M/M, accelerating vs the prior 1.4%. At the open, Spanish HICP data was released, and showed a rise to 6.1% Y/Y in February (it was expected to fall to 5.5% from 5.9%), exacerbating the downside in the fixed income complex.

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: Italy’s January trade balance, December industrial sales, and Spain’s December current account are scheduled to be released in the morning. EMFX traders will note the NBH’s rate decision, where it is expected to hold its Base Rate at 13.00%. The speaker’s slate is quiet, though will feature BoE Chief Economist Pill who will be speaking at a conference, and the BoE’s Cunliffe on crypto assets.


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  NORTH AMERICAN DATA/SPEAKERS: The US data slate contains advanced good trade balance, the weekly RedBook, and Canada December/Q4 GDP data in the pre-market; Case Shiller and the FHFA will also release stale house price data for December will also be out before the open. After the start of cash equity trading, the Chicago PMI for February and the Richmond Fed’s February business survey will be due. Chicago Fed’s 2023 voter Goolsbee will deliver remarks; traders will note that he has been touted as a potential Fed Vice Chair candidate to replace Lael Brainard, who is now National Economic Council chief; (note other candidates recently touted include Harvard professor Karen Dynan and Kellogg School of Management professor Janice Eberly). The Fed’s discount rate minutes will be released in the afternoon.


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  ENERGY: Brent April 2023 future will expire today. The API is expected to report its gauge of weekly inventories after the US close today; this week, analysts expect crude stocks to build by 0.4mln, distillates are seen drawing 0.5mln, while gasoline stocks are expected to build by 0.7mln.


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  SUPPLY: Netherlands will auction EUR 1.5-2.5bln of 2038 DSL, while Germany will auction EUR 6.00bln 2025 Schatz. Our G7 bonds note can be accessed here.


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  US CORPORATE EARNINGS: Notable US Corporate earnings out today include TGT and MNST; our full daily earnings estimate sheet can be accessed here.

STOCK SPECIFIC NEWS:

• Our full European equity specific briefings for February 28th can be accessed here and here.


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  CONSUMER CYCLICAL: Adidas (ADS GY) was upgraded at Berenberg and at JPMorgan; JPMorgan downgrades Puma (PUM GY).


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  CONSUMER STAPLES: Casino (CO FP) sales growth cooled in Q4, while FY22 sales were a little above expectations. Ocado (OCDO LN) saw lower PBT than expected, and annual loss widened. Campari (CPR IM) upgraded at Morgan Stanley.


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  ENERGY: Shell (SHEL LN) CEO Sawan was among a number of top managers who in 2021 discussed the merits of moving the HQ and listing to the US, but did not advocate for a move US. Saipem (SPM IM) exceeded targets in FY22, raises expectations for FY23.


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  FINANCIALS: Santander (SAN SM) raises shareholder pay-out ratio to 50% from 40%. Swiss watchdog concludes Greensill proceedings against Credit Suisse (CSGN SW). Abrdn (ABDN LN) slumped to a pretax loss as market turmoil weighed; will sell its Abrdn Capital business to LGT. AXA (CS FP) has sold of most of its shares is BMPS (BMPS IM) at EUR 2.33/shr. RSA (RSAB LN) to offload GBP 6.5bln of pension liabilities to Pension Insurance Corp. Man Group (EMG LN) beats expectations on AUM, revenue grows, John Cryan to retire from the board. St James Place (SJP LN) reported gross inflows of GBP 17bln.


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  HEALTH CARE: Bayer (BAYN GY) earnings top estimates, but sees lower FY23 operating profits due to cost inflation. Roche (ROG SW) joined with the US CDC to strengthen lab systems to combat HIV and tuberculosis epidemics. GN Store (GN DC) upgraded at Jefferies.


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  INDUSTRIALS: Adecco (ADEN SW) Q4 earnings fall short of forecasts, sees signs of hiring slowdown at start of 2023. Wizz Air (WIZZ LN) to suspend all flights to and from Moldova in March over security concerns. Aena (AENA SM) returns to FY net profits, sees FY23 traffic levels back to normal. ACS (ACS SM) FY22 net profits rise 66%. Intertek (ITRK LN) sales and EBIT above expectations in FY22. Serco (SRP LN) FY22 sales and EPS in line, medium-term targets maintained. Travis Perkins (TPK LN) profits slipped 16% in FY22, product cost inflation expected to moderate into 2023.


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  MATERIALS: Mondi (MNDI LN) downgraded at JPMorgan. Croda (CRDA LN) FY22 sales and PBT above expectations.


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  REAL ESTATE: Scout24 (G24 GY) sales were in line, net a little short, maintains guidance. Unite Group (UTG LN) PBT above expectations. Stifel Nicolas upgrades Land Securities (LAND LN), Shaftesbury (SHB LN), and Unite Group (UTG LN).


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  TECH: Nexi (NEXI IM) to acquire a 80% stake in Sabadell's (SAB SM) Paycomet for EUR 280mln; Sabadell will hold onto the remaining 20% for a minimum of three years.


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  UTILITIES: Red Electrica (RED SM) FY net profits fall, to propose allocation of complementary dividend.

28 Feb 2023 - 08:15- Fixed IncomeData- Source: Newsquawk