EUROPEAN EQUITY UPDATE: Stocks attempt to recoup lost ground ahead of key jobs report

Analysis details (09:13)

• European equities (Stoxx 600 +0.5%) trade on the front-foot as indices attempt to recoup lost ground with the Stoxx 600 on track to close the week out with losses of around 1.7%. Price action for the week has largely been dictated by the fixed income space as equities struggled to cope with the ramp up seen in global bond yields. Macro drivers for the session have been light with market participants awaiting this week’s main data highlight today in the form of the US jobs report (see below for details). Given the focus on today’s release, it is likely that by the close of business today the main driver for equities in Europe will be the US jobs report with a better-than-expected outturn for German Factory orders unable to move the dial.


• Asia-Pac stocks traded mostly in the green albeit with some of the upside capped following the inconclusive performance on Wall Street and as participants await the incoming US Non-Farm Payrolls report. ASX 200 (+0.4%) was positive with the index led by gains in the top-weighted financial sector after the latest RBA Financial Stability Review which noted increasing global financial stability risks but also stated that Australian banks are well-capitalised and well-positioned to absorb loan losses. Nikkei 225 (-0.1%) was choppy as better-than-expected Household Spending data was offset by slower wage growth, while former BoJ official Momma said the BoJ will likely discuss whether to tweak forward guidance along with YCC at the end-October meeting. Hang Seng (+1.3%) outperformed amid strength in tech, property, and banking stocks, with sentiment also underpinned by hopes of a stabilisation in US-China ties. 


• US equity futures (ES +0.1%, NQ +0.2%, RTY +0.1%) are trading marginally firmer, with overall sentiment tentative ahead of the big NFP report, expected to be released at 13:30 BST / 08:30 ET.  The headline figure is expected to rise to 170k (prev. 187k), with forecasts ranging between 90-256k. The unemployment rate is seen easing to 3.7% (prev. 3.8%) and wage data is seen rising 0.3% MM (prev. 0.2%), a full NFP preview can be found in the Newsquawk Research Suite. The tight labour market has been mentioned by a number of Fed members and will be a key factor influencing the next policy decision, with markets currently pricing in a 22% chance of a hike in November. Away from the main event, the Canadian jobs market data will also be published, and traders will keep a keen eye out for Fed’s Waller, who is the first speaker scheduled to give remarks post-NFP. In terms of stock specifics, according to Reuters sources, Exxon (XOM) is in talks to acquire Pioneer Natural Resources (PXD), which would value the Co. at around USD 60bln. The sources add that if negotiations conclude, an agreement between the Co’s could be reached in the coming days.  


• Equity sectors in Europe are mostly firmer with Construction & Materials top of the leaderboard as Heidelberg Materials (+3%) benefits from a broker upgrade at HSBC. Basic Resource names are also on the front foot following reports that China Mineral Resources Group is in talks with BHP, Rio Tinto (+1.4%), Fortescue and Vale regarding next year's iron ore supply; note, Rio Tinto has also been supported by a broker upgrade at UBS. To the downside, Food, Beverage and Tobacco names lag with no clear-cut reason behind the move; some desks are noting comments from Walmart that weight loss drugs (which suppress appetite) could hamper demand for the sector. In the health care sector, GSK (+0.4%) has completed the sale of 270mln shares in Haleon (-1.2%) at a price of 328p/shr. Co. has raised gross proceeds of approx. GBP 885.6mln and post-sale GSK will hold around 7.4% of issued share capital of Haleon. Elsewhere, Sanofi (+0.2%) is said to explore the acquisition of cancer drugmaker Mirati Therapeutics (MRTX), according to Bloomberg. Philips (-9.6%) sits at the foot of the Stoxx 600 after the US FDA said it remains unsatisfied with Philips' product recall, adding that Phillips testing of recalled respiratory products is not sufficient to evaluate risks. Finally, Aviva (+7.9%) is the best performing stock in the Stoxx 600 as takeover talk continues to surround the name.

06 Oct 2023 - 09:13- EquitiesData- Source: Newsquawk