EUROPEAN EQUITY UPDATE: Choppy trade across stocks with traders eyeing the UK Chancellor's statement in the absence of other catalysts

Analysis details (09:05)

Cash bourses in Europe kicked off Monday’s session mixed before briefly moving into the green across the board and then dipping back to a mixed picture in early trade. Futures in Europe traded in the red across the board overnight but felt some tailwinds on hopes that the newly appointed UK Chancellor will further scale back the “mini-budget” in a statement due at 11:00BST/06:00EDT. US equity futures are firmer across the board following the hefty selloff experienced on Wall Street on Friday, albeit price action remains somewhat contained in early European hours with the ES, NQ, and RTY firmer by around 0.8-1.0% at the time of writing, with earnings season picking up in pace this week after large banks reported on Friday, with earnings this week including the likes of Goldman Sachs, Johnson & Johnson, Tesla, and many more. Analysts at Morgan Stanley suggest US stocks could see a short-term rally until companies flag an earnings capitulation or a recession arrives – with the desk seeing the SPX rising to 4,150 in this rally. However, the analysts caveat that if the index remains under its 200 WMA (around 3,600), then the SPX could decline straight to 3,400 or lower. Back in Europe, it’s been a choppy session thus far as the core cash indices trade between gains and losses. Sectors are mixed with no overarching bias, whilst Energy, Utilities, Telecoms and Food & Beverages lead the gains as Tech, Industrials, and Consumer Products sit on the other end of the spectrum with losses. The UK’s FTSE 100 sees support from Financials and Housing names in the run-up to UK Chancellor Hunt’s statement, whereby the general view is that most of the GBP 45bln worth of unfunded tax reductions outlined by Hunt’s predecessor Kwarteng in the mini-Budget is set to be scrapped. The only components that are seemingly set to remain include the National Insurance Contributions (NIC) cut worth 13bln and possibly the stamp duty adjustments, albeit the latter is unclear. On the topic of UK stocks, analysts at Berenberg are looking for value opportunities in UK equities as “In the absence of clear liquidity or earnings support, investors need to lean heavily on valuation before taking on equity exposure”, according to the desk. In terms of individual movers, Monday's M&A sees ITV (+9.2%) reportedly reviewing the future of ITV Studios, which would include a potential sale of a stake in an attempt to support the share price, according to The Times. Credit Suisse (+1.1%) is said to be considering the sale of parts of the domestic bank as part of plans to offset a CHF 4.5bln capital hole, according to FT sources. Elsewhere, Cevian Capital sold the vast majority of its stake in Vodafone (+0.3%) by the end of June, according to FT sources. Separately, the telecom name and Altice are to create a 50/50 JV within Germany, connecting up to 7mln homes.

17 Oct 2022 - 09:05- EquitiesResearch Sheet- Source: Newsquawk