EUROPEAN EQUITY UPDATE: Monday blues in full force for European stocks

Analysis details (09:36)

European equities (Eurostoxx 50 -1.7%, Stoxx 600 -1.6%) have kicked the week off on the backfoot following the selling pressure seen on Wall Street on Friday whilst the APAC session was also a despondent one, albeit amid holiday-thinned conditions with China away from market for the rest of the week. European futures bounced off the lows ahead of the cash open following news that the UK government is to abandon its plan to scrap the 45p tax rate, however, the reprieve proved to be only temporary with broader market conditions prevailing. US futures are more of a mixed bag (ES -0.2%, NQ -0.6%, RTY +0.2) with the tech-laden NQ lagging peers. Last Friday saw the S&P 500 close off its worst monthly decline since March 2020 with traders looking ahead to the upcoming US jobs report which is expected to show an addition of 250k. More immediately, today sees the release of the ISM Manufacturing survey for September which is expected to be little changed; the S&P equivalent PMIs rebounded in September, although they have fallen more than ISM had recently. In terms of desk views, analysts at Morgan Stanley suggest that a Fed pivot will be likely at some point given the trajectory of global M2 money supply, however, suggests the timing of such a move is uncertain and will not alter the course of earnings estimates. Credit Suisse has cut its 2022 SPX target to 3,850 from 4,300 and initiated its 2023 target at 4,050. Elsewhere, analysts at Citi remain overweight UK stocks and suggest that any forced selling would present a buying opportunity on the basis that equities in the region have cheap valuations and heavy overseas exposure. Sectors in Europe are mostly lower with the exception of Energy and Utility names as the former is underpinned by OPEC-inspired upside in crude benchmarks. To the downside, Banking names lag with Credit Suisse (-8.3%) the worst performing stock in the Stoxx 600 amid ongoing speculation over the fragility of the Bank’s outlook with many commentators pointing towards the recent upside in the Co.’s CDS. On Friday, CEO Koerner stated that the firm is at a critical moment whilst noting that Co. has a strong capital base and liquidity. Elsewhere, RWE (+1.2%) is at the top of the DAX following reports that it is to buy Con Edison's Clean Energy Businesses for USD 6.8bln, whilst ABB is lower (-5.8%) after completing the spin-off of its Accelleron unit.

03 Oct 2022 - 09:36- Research Sheet- Source: Newsquawk