EUROPEAN EQUITY UPDATE: Stocks eke out mild gains ahead of US inflation metrics

Analysis details (09:25)

• European equities (Eurostoxx 50 +0.3%) are trading with modest gains in the wake of the late gains on Wall Street yesterday and the upbeat APAC session overnight. In terms of macro impulses for the region, narrative-altering data releases are somewhat lacking. However, the market will likely be taking some solace from the recent pullback in crude prices as the geopolitical premium from events in Israel has been unwound throughout the week. That said, Dutch TTF prices have picked up in recent sessions with the Australian labour union dispute still ongoing. For now though, policymakers at the ECB continue to signal that the Bank is likely done when it comes to additional monetary tightening. This morning saw the release of UK GDP and output data with the former printing in-line on a M/M basis at 0.2% for August, whilst figures for the latter were softer across the board.


• Asia-Pac stocks were firmer after the region took impetus from the intraday rebound on Wall St where dovish Fed rhetoric offset the hot PPI data. ASX 200 (Unch.) was led higher by early outperformance in its top-weighted financial industry although the gains in the index were limited as energy and the defensive sectors lagged. Nikkei 225 (+1.7%) was boosted on a break above the 32,000 level following softer-than-expected PPI data and comments from BoJ Board Member Noguchi who continued to toe the dovish line. Hang Seng (+1.7%) and Shanghai Comp. (+0.9%) were underpinned by which the Hong Kong benchmark gapped above the 18,000 level and spearheaded the advances in the region, while Chinese banks were buoyed by reports that China’s sovereign wealth fund raised its stake in the largest domestic banks for the first time since 2015. Later in the session, Bloomberg reported that China is studying easing foreign stake limits in Chinese firms, in-fitting with reports in September.


• US equity futures (ES +0.2%, NQ +0.3%, RTY +0.5%) are trading on the front foot, continuing the strength seen in yesterday’s session, with the hotter-than-expected PPI print unable to cap sentiment. Commentary from Waller (Hawk) perhaps spurred on some of the constructive sentiment, following remarks that financial markets are tightening and will do some of the work for the Fed. Later in the session, the FOMC Minutes revealed little new information, repeating much of the key messages from last month’s press conference, though did highlight that not enough progress had become apparent in the core CPI figures. So, looking at today’s print, headline CPI is expected to fall to 3.6% (prev. 3.7%), with core metrics also expected to fall from the prior. The hotter PPI print yesterday may bring some uncertainty to today's data, with desks noting that both PPI and CPI have surprised in the same direction relative to expectations 54% of the time. Elsewhere, weekly initial jobless claims will be released at the same time as the CPI data (13:30 BST / 08:30 ET), while traders will also be looking to US corporate earnings (DAL, FAST, WBA, DPZ due today ahead of bank earnings which start on Friday). Finally, remarks from Logan, Bostic and Collins will all be closely watched, giving the markets a first insight into the member's thoughts post-CPI.


• Equity sectors in Europe are mostly firmer with Basic Resources and Energy top of the leaderboard, whilst Telecoms lag to the downside amid losses in Ericsson (-1.2%) after the Co. announced an impairment charge of SEK 32bln alongside its Q3 earnings update. easyJet (-3.5%) is another notable laggard in Europe after its FY23 update saw the Co. report softer-than-expected passenger figures, whilst also announcing an agreement with Airbus (+0.5%) to buy up to 257 jets from the Co. in a deal which could be valued up to USD 20bln. On a more optimistic footing, Publicis (+3.2%) shares are higher post-Q3 results which saw the Co. raise FY23 targets, whilst Suedzucker (+1%) after beating H1 earnings estimates and boosting its profit guidance. In the UK retail sector, BooHoo (-4.2%) and Asos (-3.6%) are lower on the session after being downgraded from neutral to sell at Goldman Sachs. Finally, Restaurant Group (+37%) shares are soaring after news that Apollo has agreed to buy the Co.

12 Oct 2023 - 09:25- EquitiesData- Source: Newsquawk