EUROPEAN EQUITY UPDATE: Stocks drift lower in choppy trade

Analysis details (09:35)

• European equities (Eurostoxx 50 -0.3%) trade with modest losses in what has been a choppy start to trade. The only notable update on the macro front has come via the ECB’s latest inflation expectations survey which saw the 1yr ahead forecast rise to 4.0% from 3.5%, whilst the 3-year held steady at 2.5%. Aside from that, incremental macro updates for the region remain on the light side and therefore it feels like the market is currently experiencing a bout of consolidation. Equity sectors in Europe are a mixed bag with Retail one of the better performing sectors as Marks & Spencer (+9.9%) sits at the top of the Stoxx 600 with H1 profits beating estimates and the Co. observing that trading momentum was maintained through October. To the downside, the Personal Care, Drug & Grocery lags peers with Ahold Delhaize (-8%) one of the worst performing stocks in Europe following poorly-received Q3 metrics. In the banking sector, we have seen earnings from the likes of Commerzbank (+4.4%), Credit Agricole (+0.9%), BMPS (-0.4%) and ABN AMRO (-8.6%). In a busy morning for German earnings, Bayer (-3.3%), E.ON (-1.9%) and Adidas (-1.4%) have acted as a drag on the DAX with losses stemmed by Continental (+2.2%) earnings. Other notable post-earnings movers include Vestas Wind Systems (+8.1%), Deutsche Post (+4.3%), Evotec (+3.8%), ITV (-6.2%) and Swiss Life (-6.1%).


• Analysts at Citi highlight how “the current reporting season has been solid in the US, but disappointing in Europe”, whereby soft guidance has been a key point of focus. Looking ahead, the desk anticipated a global EPS slowdown as opposed to a “full-blown recession” with a recovery to take place next year. Citi is of the view that such an environment would be more conducive of cyclical outperformance and retains a preference for European and EM equities, whilst gearing its global strategy towards cyclicals and growth over defensives.


• APAC stocks traded mixed following a similar lead from Wall Street, with the breadth of the markets in early APAC hours particularly narrow. ASX 200 (+0.3%) saw the tech sector leading the gains following a similar yield-driven sectoral performance on Wall Street. Nikkei 225 (-0.3%) was initially supported by the Electronics sector with Nintendo shares rising over 6% post-earnings, whilst the Oil sector limited gains and the index eventually fell into losses as BoJ governor Ueda said the Bank doesn't necessarily need to wait until real wages actually turn positive in exiting YCC and negative rates. Hang Seng (-0.5%) and Shanghai Comp (-0.2%) moved between modest gains and losses with little action seen despite a slew of comments from the PBoC governor, while markets braced for next week’s Biden-Xi meeting in San Francisco, although no major breakthrough is expected.


• US equity futures (ES -0.1%, NQ -0.2%, RTY -0.3%) are trading marginally weaker, with minor underperformance in the Russell as the economy-levered index continues to extend on losses seen in yesterday’s session. The focus for today will largely be on Fed speakers, with a total of four members due to speak throughout the day, including; Williams, Barr & Jefferson, though Powell at 14:15 / 09:15 ET, will likely take the spotlight. Yesterday was a busy day for Fed speakers, with mixed commentary coming from the various members. Fed’s Kashkari (Hawk) said “I’m not seeing a lot of evidence that the economy is weakening”, whilst Fed’s Goolsbee (Dove) remained cautious and said there is still a lot of information to gather. As for data, the only notable release will be US Wholesale Sales, whilst energy traders will also be cognizant of the fact that EIA data for this week will be postponed. On the earnings front, traders will make note of releases from Fisker, Under Armour, Warner Bros Discovery and Disney.

08 Nov 2023 - 09:35- Research Sheet- Source: Newsquawk