EUROPEAN EQUITY UPDATE: European stocks eke out gains ahead of blockbuster US CPI

Analysis details (09:35)

European equities (Eurostoxx 50 +0.5%) have extended on yesterday’s gains following the advances seen on Wall Street in the US afternoon as participants braced for today’s US CPI report. The handover from the APAC region was a mostly positive one with outperformance in the ASX amid gains in commodity-related industries, whilst the Nikkei struggled to muster gains after Japanese press reports suggested the BoJ will review the side effects of its monetary easing at next week’s policy meeting. Stateside, US futures are hugging the unchanged mark with the ES capped by resistance at 4k. As mentioned, US CPI data for December lies ahead and will inform the debate on whether the Fed has made substantial progress in reducing price pressures back towards target. The data may help crystallise expectations of a 25bps rate rise at the February FOMC, as well as expectations for a terminal between 4.75-5.00% (more dovish than the Fed's SEP implies). As part of its European Q4 earnings preview, JP Morgan expects generally solid Q4 numbers and demand commentary with limited signs so far of the weakening macro environment that indicators look to imply. JPM adds that “the focus will be on the outlook and we expect messaging here to remain robust, even if increasingly tinged with caution, companies that guide to do so conservatively and share prices to generally hang-in despite the strong start to the year”. Sectors in Europe are higher across the board with outperformance in Real Estate names; Persimmon (+4.4%) is a notable gainer in the sector following its latest trading statement. Other outperforming sectors include Autos, Travel & Leisure and Retail. It has been a busy session for the latter amid Christmas trading updates from Marks & Spencer (-2%) and Tesco (-0.3%) which highlighted concerns over the consumer outlook for 2023, whilst Asos (+14.9%) is showing solid gains after noting a GBP 300mln cost-cutting package alongside disappointing sales data. Ubisoft (-18.4%) is by far the worst performer in the Stoxx 600 after a dreadful update which saw the Co. cut financial targets and scrap three unannounced games. Signify (-3%) is also softer on the session after the Co. lowered sales guidance on account of a stronger-than-expected deterioration of its business in China. On a more positive footing, Centrica (+5.8%) sits at the top of the Stoxx 600 with the Co. forecasting earnings ahead of market expectations.

12 Jan 2023 - 09:35- Research Sheet- Source: Newsquawk

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