EUROPEAN EQUITY UPDATE: Stocks fade opening gains and US futures slip into the red

Analysis details (09:44)

European equities (Eurostoxx 50 +0.1%) kicked the week off on the front foot following the gains on Wall St on Friday (SPX +2.4%, NDX +2.3%) where stocks were underpinned by hopes that the Fed will move towards a lower increment of rate hikes at the December policy meeting. However, stocks faded this move and are now closer to the unchanged mark, whilst the FTSE 100 lags alongside a firmer GBP amid hopes of former Chancellor Sunak being appointed as PM. The APAC session was more mixed amid weakness in Chinese stocks after Chinese President Xi secured an unprecedented third term as the party leader and filled his leadership team with loyalists. Furthermore, Chinese Q3 GDP Y/Y topped forecasts and the Trade Balance printed a larger surplus than expected, however, September retail sales underwhelmed. Tech stocks in Hong Kong were notably lower with Tencent (-11.4%) posting its largest daily percentage decline since 2008. In Europe, Eurozone PMIs saw the composite metric fall to 47.1 from 48.1 with both manufacturing and services declining from their priors. In the accompanying commentary, S&P Global noted that “the eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October”. Stateside, US futures (ES -0.4%, NQ -0.5%, RTY -0.5%) gave up opening gains which saw the ES and NQ briefly topping 3,800 and 11,500 respectively as some of the optimism from Friday began to fade. In the US, PMI data and the National Activity Index are due, and there will be no Fedspeak with the central bank in blackout ahead of its November 2nd meeting. Over the weekend, Stifel’s analysts said they see the S&P 500 rising to 4,300 over the next six-months as inflation slows, and argues that peak Fed hawkishness is in the price. Elsewhere,  Goldman Sachs noted that it had tweaked its sector allocations view this week to reflect risks of a further economic slowdown and higher interest rates. Sectors in Europe are mostly firmer with the exception of Energy, Basic Resources and Technology with the former two hampered by price action in underlying commodities. To the upside, Media, Food & Beverage and Financial Services lead peers. In terms of individual movers, Indivior (+6.4%) sits at the top of the Stoxx 600 following a broker upgrade at Morgan Stanley. Phillips (-0.8%) is lower on the session after Q3 sales fell short of expectations and announced it is to reduce its headcount by 4k. Elsewhere, it’s been a busy morning of newsflow for Credit Suisse (+0.8%) after reports noted its CCO is to leave the company, whilst separate reports suggested that Janus Henderson and Blue Owl Capital are reportedly considering offers for the Co's US asset management unit and the Co. is also said to be considering a CHF 2bln capital increase.

24 Oct 2022 - 09:43- Research Sheet- Source: Newsquawk