EUROPEAN EQUITY UPDATE: Horizontal trade across stocks with traders zeroing in on the US jobs report

Analysis details (09:47)

Equities in Europe are mostly mildly softer with the ranges particularly narrow ahead of the US jobs report. Desks are forecasting 200k nonfarm payrolls will be added in November (prev. 261k), while the unemployment rate is seen unchanged at 3.7%. Given that the Fed’s policymaking is currently centred around managing inflation, traders will be closely watching the wages metrics (Full Newsquawk preview available in the Research Suite). APAC markets closed lower with Japan’s Nikkei 225 the underperformer as exporters were discouraged by the firmer JPY. US equity futures are trading horizontally with mild and broad-based losses pre-NFP (ES -0.1%, NQ -0.2%, YM -0.1%). Strategists at Barclays noted that a large majority of clients see the recent equities rally as positioning-driven as opposed to fundamentally-led, and thus remain sceptical. “Consensus is that recession is coming and equities cannot bottom before it starts, central banks will continue to tighten policy as inflation won’t fall quickly, China reopening will be messy and Europe remains tricky”, the desk says, while it suggests the medium-term pain trade could be to the downside in the event of a hard landing. Meanwhile, SocGen analysts delve into Europe and believe European stocks are now fairly valued after the November rally, but the French bank is looking for better entry points. SocGen strategists acknowledge the Stoxx 600 is above the bank’s end-2023 target of 440 but recommends waiting for levels closer to 400. The bank remains constructive on equities amid signs of easing inflation and bullish developments from central banks. Elsewhere, the latest BofA Flow Show (in the week to Wednesday) suggested US saw the largest outflow since April 2022 at USD 16.2bln, while Japan saw outflows resume at USD 0.6bln, and Europe saw outflows for the past 42 weeks, with USD 0.9bln this week. By style, US small caps saw outflows of USD 0.6bln, US growth saw outflows of USD 1.6bln, US value saw outflows of USD 5.8bln, and US large caps saw outflows of 14.5bln. By sector, inflows were seen for utilities (USD 0.9bln), and health care (USD 0.7bln); while there were outflows in materials (USD 25mln), telcos (USD 35mln), energy (82mln), real estate (0.1bln), consumer (USD 0.2bln), tech (USD 0.2bln), and financials (USD 0.6bln). Back in Europe, indices remain subdued (Euro Stoxx 50 -0.2%, Stoxx 600 -0.3%) while sectors are mixed with no overarching theme. Real Estate, Media, and Tech reside towards the top of the bunch while Energy, Basic Resources, and Autos sit at the bottom. In terms of individual movers, Cineworld (+14%) shares soar amid speculation competitor Vue could be eyeing the company after Vue's founder confirmed the company was ready to take advantage of any takeover opportunities of a rival that presented itself.

02 Dec 2022 - 09:50- Research Sheet- Source: Newsquawk