EUROPEAN EQUITY UPDATE: Stocks climb off lows but remain caged amid light newsflow and ahead of a holiday-shortened week

Analysis details (10:11)

• European equities (Eurostoxx 50 +0.1%) trade with little firm direction and meander around the unchanged mark, though with initial mild losses in the DAX (unch.), hampered by Bayer (which holds a 4.3% weighting in the DAX) while the FTSE 100 (-0.1%) sees modest underperformance. The docket is light today from the data perspective, whilst ECB’s Wunsch (Hawk) provided commentary very much in fitting with previous remarks, which ultimately leant more on the hawkish side. In terms of the day ahead, the markets will await commentary from more ECB speakers, including ECB’s de Cos (Dovish) and Villeroy (Neutral).


• Equity sectors in Europe are mixed, with slight outperformance in Retail, Telecommunications and Utilities, with the latter being propped up by Cellnex (+2.3%), after reports that the Co. is said to be planning a sale of its Irish and Austrian unit, according to Cinco Dias. To the downside, Healthcare is the clear underperformer, dragged down by Bayer (-19.7%), which had several negative stories today; including a voluntary recall of its larotrectinib drug and a study stopped early due to lack of efficacy, while Bayer is also ordered to pay USD 1.56bln to four plaintiffs who claimed in its Roundup case, according to Reuters. Financial Services also finds itself at the foot of the sectors, hampered by Julius Baer (-9.5%), which reported that it does not expect the FY23 net profit level to reach the one achieved in 2022. Over to London, Ashtead (-9.4%) is extending losses after the Co. lowered its profit expectations and revenue forecasts, and Compass Group (-3.2%) also finds itself in the red despite beating on its earnings metrics and announcing a USD 500mln share buyback. Analysts have cited that the announced share buyback is at the bottom end of expectations, hence fuelling the negative price action.


• Asia-Pac stocks were mostly positive albeit with gains capped amid the lack of fresh catalysts from over the weekend and as participants await this week’s key risk events including the FOMC minutes which will be released on Tuesday. ASX 200 (+0.1%) finished marginally higher as strength in energy and financials was partly offset by losses in utilities and miners, while a quiet data calendar further added to the non-committal mood. Nikkei 225 (-0.6%) swung between gains and losses in which an early rally saw the index climb above 33,850 and print its highest level since 1990, before wiping out all its gains and more. Hang Seng (+1.7%) and Shanghai Comp. (+0.5%) outperformed amid resilience in tech and with the property sector underpinned by support pledges, while China’s latest benchmark 1-year and 5-year Loan Prime Rates were unsurprisingly maintained.


• US equity futures (ES +0.1%, NQ +0.2%, RTY Unch.) are trading mixed, with trade ultimately lacking a firm direction. The docket for today is light, with the only data release of note coming by way of US Leading Index Change, whilst markets will also keep an eye out for remarks from Fed’s Barkin (2024 Voter, Neutral). Additionally, bond traders will be cognizant of US 20yr bond supply. In terms of equity specifics, Microsoft (MSFT, +2.1%) are extending gains in the pre-market as the Co. announced former OpenAI executives Altman and Brockman are to join the Co. and lead a new advanced AI research team. Finally, it's worth reminding that it is US Thanksgiving on Thursday, with the market subject to early closures on the final two days of the week.

20 Nov 2023 - 10:11- Fixed IncomeResearch Sheet- Source: Newsquawk