EUROPEAN EQUITY UPDATE: Mixed bag for European stocks as opening gains fade

Analysis details (09:45)

European equities (Eurostoxx +0.2%) are on a mixed footing after opening gains were scaled back. Incremental fundamentals for Europe remain light ahead of upcoming ZEW data with the region initially following suit to the mostly constructive APAC session which saw notable strength in Chinese stocks with the Hang Seng closing higher by 4.1% amid a 7.3% jump in its Tech Index. Stateside, futures are on a firmer footing (ES +0.6%, NQ +1%, RTY +0.7%), albeit the ES is thus far unable to reclaim the 4K mark after printing a high of 4017.5 during yesterday’s session. Following remarks from Fed Vice-Chair Brainard yesterday who suggested that although there is more work to be done, the Fed will likely soon move towards a slower pace of hikes, markets will subsequently be parsing further Fed interjections with today’s slate including 2022 voters Barr & Cook and 2023 voter Harker. On the earnings pipeline, the season is continuing to wrap-up with Home Depot (HD) and Walmart (WMT) due to release numbers today. Of note, JPMorgan strategist Marko Kolanovic is reducing his overweight equities position because recession risks remain high, Bloomberg reports. Kolanovic still remains constructive on equities, maintaining a long-term overweight view, but has used the recent rally to reduce overweights. Elsewhere, the latest BofA Global Fund Manager survey revealed that sentiment is still “uber-bearish” with 77% of investors expecting a recession. The survey also suggested fading a move in the S&P 500 at 4100 whilst 59% (prev. 53% MM) of investors see further upside for European equities over the next 12-months, the highest proportion in six months. Sectors in Europe are mixed with outperformance in Utilities and Food & Beverage whilst Retail is a clear laggard to the downside alongside losses in Ocado (-11.6%). Ocado is one of the worst performers in the Stoxx 600 as commentary from the Co. about wanting to become the “Tesla of grocery ecommerce technology” is overshadowed by a negative column in the Times which stated that backing the Co. “requires investors to maintain blind faith”. Vodafone (-6.8%) is another standout laggard after the Co. lowered its FY outlook alongside a decline in H1 earnings, whilst Credit Suisse (-1.7%) shares are seen lower after agreeing to sell a large part of its SPG unit to Apollo and cutting senior jobs in Asia. To the upside, BAE Systems is one of the best performers in the FTSE 100 after being awarded a GBP 4.2bln contract to construct five Royal Navy ships.

15 Nov 2022 - 09:45- Research Sheet- Source: Newsquawk