EUROPEAN EQUITY UPDATE: Stocks boosted with outperformance in the FTSE 100 post-UK data

Analysis details (09:34)

• European equities (Eurostoxx50 +0.3%) are trading on a firmer footing with clear outperformance in the FTSE 100 (+0.8%), propped up by strength in Basic Resources and lower UK wage metrics. Taking a deeper look at the UK data, the unemployment rate remained unchanged at 4.2%, whilst Average Earnings dropped to 7.2% from 7.7%. Capital Economics said, "the sharp fall in wage growth in October will probably further fuel investors’ expectations that interest rates could be cut as soon as the middle of next year, and leaves our forecast for rate cuts to start late in 2024 looking a bit more challenging”. Over to Germany, Wholesale Prices YY improved to -3.6% (prev. -4.2%). The docket for today includes some very important data releases, including; EZ and German ZEW, where focus will then turn to US CPI thereafter.


• European sectors are generally firmer, though the overall breadth of the market is fairly narrow. Technology, Media and Basic Resources outperform with the latter propped up by broker upgrades for both Rio Tinto (+2.1%) and ArcelorMittal (+2.7%) at JP Morgan. Telecommunications is found at the foot of the pile, hampered by losses in BT (-1.3%) and Vodafone (-1.1%), which suffer from news that UK’s OFCOM has proposed a ban on inflation-linked mid-contract price increases, citing concerns that customer contracts do not provide sufficient price certainty. Healthcare is also dragged down by losses in Novo Nordisk (-2.6%), seemingly weighed on by news yesterday that patients regained weight after stopping Eli Lilly’s Zepbound drug. Carl Zeiss Meditec (+6.7%) is gaining after it beat on its results, though is ultimately unable to offset the downside within the sector. In terms of individual movers, SAP (-0.2%) is in the red (though has pared back over a percent since the open), following Oracle’s miss on its revenue metrics. Renault (-1.9%) initially rose on news that the Co. is to sell 211mln Nissan shares, though has since fallen into the red. The worst performing stock in the Stoxx600 is Hargreaves Lansdown (-8.2%), after the FCA wrote to investment platforms and SIPP operators, mentioning concerns on the way they deal with any interest earned on customers’ cash balances.


• Asia-Pac stocks were mostly positive as the region took impetus from the gains on Wall St where the major indices steadily edged higher in a catalyst-light session ahead of upcoming major risk events. ASX 200 (+0.5%) was led by outperformance in the tech sector but with the upside in the index capped following mixed data releases in which Westpac Consumer Sentiment improved but NAB Business Confidence printed its worst reading since 2012. Nikkei 225 (+0.1%) surged at the open and briefly reclaimed the 33,000 level after a recent source report that the BoJ sees little need to end negative rates in December and officials have not yet seen sufficient evidence of wage growth which would support sustainable inflation. However, the index then steadily gave up nearly all of its gains as the effects of a firmer currency gradually seeped through. Hang Seng (+1.3%) and Shanghai Comp. (Flat) were both initially underpinned after China convened the Central Economic Work Conference to discuss the 2024 growth target and the State Council issued measures on integrated development of domestic and foreign trade, although the mainland index ultimately lagged and was contained beneath the psychological 3,000 level.


• US equity futures (ES +0.1%, NQ +0.2%, RTY +0.2%) are trading on a slightly firmer footing, building on gains seen in the prior session. Today's focus will be on US CPI data which will help shape expectations for next year's Fed policy; the data is unlikely to be a game changer for the December meeting on Wednesday, analysts said. Headline CPI is expected to fall to 3.1% (prev. 3.2%), with expectations ranging between 3.0-3.1%. In terms of stock specifics, Oracle (ORCL, -8.2%) shares are markedly lower in the pre-market after the Co. reported a miss on its revenue metrics. Over to toymaker Hasbro (HAS, -5.5%), the Co. announced it will cut nearly 20% of its workforce amid sluggish sales, WSJ reports, as weak sales for toys and games persist even amid the holiday shopping period.

12 Dec 2023 - 09:38- EquitiesData- Source: Newswires