EUROPEAN EQUITY UPDATE: Stocks edge higher ahead of all-important Eurozone CPI

Analysis details (09:35)

European equities (Eurostoxx 50 +0.5%) trade on a firmer footing following mixed leads from Wall St. yesterday and APAC overnight. The focus for the APAC session remained on China whereby recent optimism from hopes of an easing of COVID controls was accompanied by disappointing Chinese PMI data which slipped into a deeper contraction. More recently, we have seen comments from a CDC official in Guangzhou who noted that the optimisation of COVID measures is aimed at creating a more effective/scientific barrier; it remains to be seen whether other regions will be able to follow suit. From a macro perspective in the Eurozone, all eyes are on today’s inflation metrics following soft prints from Spain and Germany during yesterday’s session. Expectations are for Y/Y HICP to cool to 10.4% from 10.6% with the ex-food and energy metric seen ticking lower to 6.3% from 6.4%. The release will be a key input into the December 15th meeting whereby around 60bps of tightening is priced in and therefore markets remain undecided between a 50bps or 75bps hike next month. Stateside, US futures (ES +0.3%, NQ +0.4%, RTY +0.3%) are trading a touch above unchanged following yesterday’s session which was characterised by notable tech selling amid a pick-up in US yields. The highlight from today comes in the form of Fed’s Chair Powell’s speech on the economic outlook, inflation and the labour market at 18:30GMT/13:30EST. Ahead of which, ING expects him to “push back against the tightening of financial conditions that occurred in the wake of the lower- than-expected CPI report.” Elsewhere, today’s data highlight in the US will be the November ADP release ahead of the NFP print on Friday; expectations are for the pace of job growth to slip to 200k from 239k (range 150k-241k). Analysts at Citi note that following a sharp rally in recent weeks alongside a softer USD, European stocks have closed the performance gap with US peers after lagging for much of this year. That said, Citi highlights Capital Goods, Insurance, Energy, and Food & Bev. as sectors which are yet to catch up. In the coming months, Citi sees Nestle, Swiss Re, Siemens and BP as outperformers. Currently, sectors in Europe are higher across the board with Autos, Consumer Products and Travel & Leisure outperforming peers with no clear bias across sectors. Renault (+5.5%) is one of the best performing stocks in the region and helping to prop up the Autos sector after a Reuters report suggested that a potential announcement on a restructured alliance with Nissan could be forthcoming as soon as December, whilst a separate report stated that the Co. has signed a "research and development agreement" with Airbus to jointly design a solid battery. H&M (+0.9%) saw modest support after announcing a restructuring programme that will see a reduction in headcount of 1500 and SEK 2bln in savings.

30 Nov 2022 - 09:35- Research Sheet- Source: Newsquawk