EUROPEAN EQUITY UPDATE: BoJ policy tweak pulls the rug on stocks

Analysis details (09:25)

Stocks in Europe are predominantly lower (Eurostoxx 50 -0.4%), albeit off worst levels as equities look to claw back BoJ-inspired opening losses. The downside at the cash open was largely a result of events surrounding the BoJ, whereby the central bank unexpectedly opted to widen its 10yr yield YCC band to +/-0.5% (prev. +/-0.25%) and announced it is to increase bond purchases to JPY 9tln/m (prev. JPY 7.3tln/m) in Q1. At the time, this sent global bond markets sharply lower with the Nikkei 225 closing down 2.5%, though support from banking names helped to cushion the downside. During his follow-up press conference, Governor Kuroda noted that the adjustment was a result of market functionality and did not mark a shift in policy from the Bank. Kuroda even went as far as to say that the BoJ would not hesitate to ease policy further if needed. Stocks were eventually able to clamber off their lows, however, many desks remain of the view that this could be the first step in the process of the Bank unwinding its ultra-accommodative policy with ING stating that “Kuroda is trying to pave the way for policy normalisation before stepping down”. Stateside, US futures are a touch below negative (ES -0.2%, NQ -0.3%, RTY -0.1%) and off worst levels with not a great deal to look ahead to on the calendar aside from US building permits and housing starts at 13:30GMT. Sectors in Europe are mostly lower, with the exception of energy and banking names as the latter is underpinned by the more favourable yield environment, which is also acting as a drag on Real Estate. In terms of individual updates, Hugo Boss (+3.7%) is the best performer in the Stoxx 600 following a broker upgrade at Deutsche Bank, whilst Elior (+8.1%) is another notable outperformer on account of acquiring Derichebourg Multiservices. Petrofac (-8.2%) is trading markedly lower after noting a prospective annual operating loss, whilst Kering (-2.7%) is suffering at the hands of a broker downgrade from SocGen.

20 Dec 2022 - 09:25- Research Sheet- Source: Newswires