EUROPEAN EQUITY UPDATE: Stocks catch up to late Wall Street gains

Analysis details (09:32)

• European equities (Eurostoxx 50 +1.5%) trade on the front-foot in a catch-up play to the afternoon gains on Wall Street which were brought about by dovish-leaning Fed rhetoric that acknowledged the impact of higher Treasury yields on financial conditions, meaning the Fed may not have to do as much when it comes to rate hikes. Closer to home in Europe, macro updates have been lacking with the region taking direction from elsewhere. Albeit, traders will be mindful of developments in the energy market after European natural gas prices rose around 17% yesterday following events over the weekend and the ongoing strike action impacting Chevron in Australia. For now though, policymakers appear to be sanguine on the matter with ECB’s Villeroy stating that the situation in Israel is now reason for the bank to tweak its inflation projections and still sees inflation at around 2% by 2025. Looking ahead, the macro calendar is light for the region, however, traders will be mindful of after-hours earnings from luxury-heavyweight LVMH which will likely be a key talking point ahead of tomorrow’s cash open given its influence over other luxury names and its 6.8% weighting in the Eurostoxx 50.


• Asia-Pac stocks were mostly positive as key markets reopened from the long weekend and following the recovery seen on Wall Street. ASX 200 (+1.0%) was lifted as utilities and tech led the broad-based gains across sectors and with the index unfazed by the mixed consumer and business confidence data releases. Nikkei 225 (+2.5%) outperformed on return from the holiday closure and got its first opportunity to react to the key market themes including last week’s US jobs data, the Israel-Hamas conflict, and the recent Fed rhetoric. KOSPI (+0.3%) was also higher with chipmakers boosted after reports that Samsung Electronics and SK Hynix will be allowed to supply US chip equipment indefinitely without separate US approvals. Hang Seng (+0.3%) and Shanghai Comp. (-0.7%) were mixed with Hong Kong lifted by strength in tech and property, while the mainland lagged amid underwhelming holiday spending and lingering debt concerns.


• US equity futures (ES +0.1%, NQ +0.1%, RTY Unch.) are trading slightly firmer, continuing to extend on the gains seen in yesterday’s session, where markets ultimately pared back initial losses sparked by geopolitical events in the Middle East over the weekend. The stocks reversal was largely driven by dovish Fed speak from Logan (Hawk), who suggested that if higher long-term rates are due to higher term premiums, there may be less need for the Fed to raise rates. Though caveated this by adding that rates are higher because of the strength in the economy. In terms of what lies ahead, the docket sees several data releases including, Wholesale Sales, Inventory, NFIB Business Optimism Index and NY Fed Survey of Consumer Expectations. Away from data, today marks yet another busy day for Fed officials, with commentary from Bostic (Dove), Waller (Hawk), Kashkari (Hawk) & Daly (Neutral). And finally, with earnings season beginning this week, focus will be on PepsiCo which is set to provide figures at 11:00 BST / 06:00 ET.


• Equity sectors in Europe are higher across the board with the exception of energy names which have seen a pullback from yesterday’s Israel-inspired gains. To the upside, Real Estate names are cheering the pullback in yield whilst Travel & Leisure stocks are being granted some reprieve from yesterday’s selling pressure which was prompted by the upside in crude prices and flight cancellations in the Middle East. In terms of stock specifics, German-heavyweight Bayer (+2.2%) is cheering an upgrade to hold from reduce at HSBC, whilst a downgrade at UBS has acted as a headwind for Adecco (-1%). On the subject of UBS (+1.3%), reporting by the FT suggests that up to USD 9bln of legal claims have been filed with more in the works over the Co.’s takeover of Credit Suisse with the claimants focusing on the Co., Finma and the Swiss government.

10 Oct 2023 - 09:32- Fixed IncomeData- Source: Newsquawk