EUROPEAN EQUITY UPDATE: Europe quickly gave up initial mild gains on Halloween month-end ahead of a busy week of risk events

Analysis details (09:25)

European bourses initially kicked off the week on a mildly positive note, but quickly adopted a mixed picture following a similar lead from APAC markets and despite the rally seen on Wall Street on Friday, which some attributed to month-end factors. On that note, Credit Suisse highlights that equities in developed markets had a good October with the US again outperforming – “Based on relative outperformance our model estimates around USD 22bln to sell in US equities from pension funds that rebalance on a monthly basis, and some USD 6.8bln to sell in developed International equities.” Sticking with US stocks, analysts at Goldman Sachs suggest investors should own US stocks with high-cash-return yields and grow, with the strategists expecting “stocks returning cash to shareholders to outperform those investing in growth through capex and R&D, as the economy slows”. Citi meanwhile maintains a 50% chance of a synchronized global recession in 2023. Back to the session, sentiment is somewhat fragile ahead of key risk events this week including the FOMC, BoE, and the US jobs report. The tone across the equities complex is corroding, with most of the bourses now in the red, albeit with modest losses. Sectors remain mixed with defensives moving up the ranks since the cash open. The Tech sector surrendered its earlier outperformance, but banks hold onto gains with NatWest (+3.0%), Lloyds (+1.9%), Barclays (+0.9%) and HSBC (+0.7%) all cheering reports via The Times that the UK government quashed suggestions that it is considering a windfall tax on banks as one of the measures to plug a hole in its finances at next month’s budget. Energy and Basic Resources sit at the foot of the bunch as the underlying crude and base metal prices are hampered by China tightening its COVID restrictions in Macau and Shanghai’s Disneyland, whilst Glencore (-1.0%) reacts to reports that Tesla (TSLA) held discussions regarding taking a stake in Glencore although discussions ended with no deal reached, via FT citing sources. Finally, sticking with M&A, easyJet (+6.0%) is bolstered by reports via The Times that IAG (+3.4%) intends to renew plans to consolidate the European airline industry, with the article adding that speculation is growing around a takeover of easyJet or TAP Air.

31 Oct 2022 - 09:25- Research Sheet- Source: Newsquawk