EUROPEAN EQUITY UPDATE: Stocks continue post-CPI ascent

Analysis details (09:35)

• European equities (Eurostoxx 50 +0.3%) are once again on the front-foot in an extension of this week’s run of gains with the latest leg higher taking place in the context of yesterday’s softer-than-expected US CPI data. From a macro standpoint, today’s main data release has come via UK GDP metrics which were above expectations/not as bad as feared, albeit cause for celebration are lacking given that the UK economy registered no growth in the 3M/3M period up to May. Furthermore, despite the positivity from the US release yesterday it remains to be seen whether EZ and UK inflation metrics due on 31st and 19th July respectively will conform to this trend.


• Asia-Pac stocks traded higher as the region reacted to the softer-than-expected US inflation data. ASX 200 (+1.6%) was firmer with all sectors lifted by the broad constructive mood and as yields in Australia continued to decline. Nikkei 225 (+1.5%) reclaimed the 32,000 level at the open, while the KOSPI (+0.6%) was also lifted following the lack of surprises from the BoK which maintained its rates at 3.50% as expected. Hang Seng (+2.6%) and Shanghai Comp. (+0.9%) were positive with outperformance in the Hong Kong benchmark due to tech strength after Chinese Premier Li met with several HK-listed tech giants, while gains in the mainland were somewhat capped alongside the latest Chinese trade data which missed forecasts. Note, Credit Suisse has upgraded Chinese equities to overweight.


• US equity futures (ES +0.3%, NQ +0.6%, RTY +0.4%) are gaining in premarket trade, with gains being led by the duration sensitive Nasdaq-100, which is being supported by lower yields. In terms of commentary, Goldman Sachs notes that the SPX is now 3% higher than where it was when the Fed began its rate hikes, adding that "for first time in 2023, we are currently being asked by multiple clients if we think the S&P 500 is now on track to clock an all-time high before year end," and its GS strategist John Flood certainly thinks this is possible, stating that "I am going with a yes on this." For the day ahead, weekly initial jobless claims metrics are due, whilst PPI data will help add further colour to the inflation narrative. On the speaker's front, Fed's Daly (2024) will appear on CNBC, and Fed Governor Waller (voter) will address Money Marketeers of NYU.


• Equity sectors in Europe are mostly firmer with tech top of the leaderboard following alongside outperformance in the Nasdaq future stateside. Elsewhere, other gainers include Basic Resources, Health Care and Energy, whilst Construction & Materials and Banks lag. In terms of individual updates, Swatch (+6.6%) is one of the best performers in the Stoxx 600 after H1 results beat expectations, whilst Watches of Switzerland (+9.9%) also benefits from earnings. Barratt Developments (-4.4%) sits at the foot of the Stoxx 600 and is acting as a drag on other homebuilders following its FY trading update, alongside which it noted the trading backdrop has become more challenging in recent months. BASF (-0.8%) has trimmed opening losses which were triggered by Q2 results which saw the Co. cut revenue and EBIT guidance driven by lower prices and volumes.

13 Jul 2023 - 09:35- Research Sheet- Source: Newsquawk