EUROPEAN EQUITY UPDATE: Stocks continue to run with yesterday’s rally

Analysis details (09:26)

European equities trade on a firmer footing (Eurostoxx 50 +1.1%, Stoxx 600 +1.1%) in an extension of yesterday’s gains with the Stoxx 600 on track to post a weekly gain of around 1.4% despite the soft showing seen at the start of the week. As was the case with yesterday’s rally, there hasn’t been a clear factor behind today’s moves with some desks continuing to cite oversold conditions, evidence of disinflationary impulses in more timely indicators (e.g. NY Fed survey) and hopes of a policy u-turn in the UK. Stateside, US futures are showing a more contained performance (ES +0.1%, NQ unch, RTY +0.2%) with the e-mini S&P back below 3700 as pausing for breath from yesterday’s rally. Today’s main data highlight will be the US September retail sales report due at 13:30BST/08:30EDT which is expected to show a 0.2% increase vs. the 0.3% pick-up reported in August. Ahead of the release, ING notes “this is definitely a figure where good news (i.e. retail sales strength) ought to be ‘bad’ for markets (risk sentiment) as it would imply the Fed has more work to do to slow the economy”. Elsewhere, Uni. of Michigan data is due at 15:00BST/10:00EDT with particular attention on the 1yr and 5yr inflation expectation components. US earnings season picks up some steam today with Banking names, JP Morgan (JPM), Wells Fargo (WFC), Morgan Stanley (MS), Citi (C) and US Bancorp (USB) all due in the pre-market. The latest BofA flow show noted that global equities saw modest inflows of USD 300mln with the regional breakdown showing that US inflows resumed at USD 5.2bln, Europe outflows at USD 0.7bln (35th week), Japan had a 1st week of outflows in 3 weeks at USD 1.3bln, and EM a 5th week of inflows USD 1.2bln. Strategists at BofA suggest that yesterday’s rally in US stocks was a “bear hug” in oversold conditions and believe that stocks will endure further pain until the Fed makes a policy pivot. Sectors in Europe are firmer across the board, with outperformance in Utilities and Basic Resources with the latter bolstered by performance in underlying commodity prices. To the downside but still in positive territory, Tech, Autos and Telecom names lag peers. Notable individual movers are on the light side today, however, it is worth noting that Credit Suisse’s SPG unit is said to be drawing interest from Mizuho Financial Group, according to Bloomberg sources. Elsewhere, Danone has initiated a process to transfer control of its EDP business in Russia which could result in a write-off of up to EUR 1bln.

14 Oct 2022 - 09:21- Research Sheet- Source: Newsquawk