EUROPEAN EQUITY UPDATE: Stocks continue to cheer the new year

Analysis details (09:35)

European equities have continued their strong start to the year (Eurostoxx 50 +1.3%) as UK participants return to the fray from the New Year break (FTSE 100 +2.0%). The session follows on from a mostly positive APAC lead (Japan was away from market) as Chinese stocks edged out gains despite soft manufacturing surveys. Fresh macro drivers for today’s session have been on the light side and therefore it is difficult to ascribe a narrative to today’s price action which is taking place in quieter-than-usual market conditions. Stateside, US futures are also firmer (ES +1.1%, NQ +1.2%, RTY +1.4%) with the ES back above the 3900 mark with upcoming risk events including ISM reports, jobs data as well as Fed minutes. According to a Reuters poll conducted late last year, analysts expect the S&P 500 to end 2023 at 4,200 (around 9.4% higher vs last week’s close). Bank of America’s analysts have warned that stock market performance could begin the year on a rough footing with a mild recession in the first half, but could end up closing out the year in recovery mode as the Fed eases the hawkishness amid the growth slowdown (BofA is below consensus in looking for the S&P to end the year at 4,000). Sectors in Europe are higher across the board with outperformance in Travel & Leisure, Tech, Financial Services and Consumer Product names. In terms of stock specifics, today’s session has been particularly broker-move heavy (see our morning sheet for full details) with Rolls Royce (+6.0%) one of the best performers in the Stoxx 600 after being upgraded to buy from hold at Jefferies with analysts of the view that a recovery in flight hours and possible credit upgrades could prove to be supportive. Elsewhere, Brenntag (+5.4%) is another notable gainer following news that it is no longer proceeding with prelim. discussions to potentially takeover Univar. To the downside, Fresenius Medical (-2.4%), MorphoSys (-2.2%) and Thales (-1.2%) have all been nudged lower by broker downgrades.   

03 Jan 2023 - 09:35- Research Sheet- Source: Newsquawk