EUROPEAN EQUITY UPDATE: Stocks firm post-FOMC in another busy morning of earnings for the region

Analysis details (08:55)

• European equities (Eurostoxx 50 +0.8%) trade on the front foot as the region follows suit to the post-FOMC tailwinds seen on Wall Street. Macro updates closer to home are on the light side ahead of an expected unchanged rate decision from the BoE and therefore focus in the equity space has fallen upon today’s busy raft of large-cap corporate updates.


• Equity sectors are higher across the board with marked outperformance in Real Estate names followed by Tech and Construction & Materials with the sectors likely benefiting from the recent pullback in yields. Elsewhere, recruitment firm Adecco (+11.2%) is top of the leaderboard in the Stoxx 600 after solid Q3 earnings, whilst in the Travel & Leisure sector, Deutsche Lufthansa (+6.4%) shares are soaring after the Co. noted that very good summer demand has extended into October; Wizz Air (+4.4%) is also seen higher post-earnings. Food delivery names in Europe such as Delivery Hero (+6.6%) and Deliveroo (+4.2%) are benefitting from after-hours earnings from DoorDash in the US (+8.9%) pre-market. In the retail sector, Hugo Boss (+4.8%) is enjoying a session of gains post-Q3 results, whilst Zalando’s (-0.3%) earnings were met with a more frosty response after the Co. lowered its outlook. UK supermarket Sainsbury’s (+3.6%) after noting that it sees FY23 at the top-end of its guided range, with other UK highlights including BT (+5.9%) and Shell (+1.5%) with the latter also benefitting from a USD 3.5bln buyback announcement. Finally, Europe’s largest company, Novo Nordisk (+2.2%) is higher after reporting record quarterly results with focus on the Co.’s blockbuster Wegovy drug.


• As part of its European equity strategy, Barclays notes that peaking rates, cleaner positioning and better seasonals has lowered the bar for stocks to bounce. That being said, the macro environment remains precarious and there is more to go for the reset in earnings. Barclays notes that it sticks with its barbell approach and it believes it is too early to reload on cyclicals.


• Asia-Pac indices mostly followed suit to the gains on Wall St where stocks were lifted by soft data releases and after Fed Chair Powell’s post-FOMC press conference spurred a dovish reaction as he poured cold water over the September dot plots which had pointed to one more hike by year-end. ASX 200 (+0.9%) was higher with gains led by notable outperformance in tech and real estate amid a drop in yields. Nikkei 225 (+1.2%) briefly climbed above the 32,000 level with the biggest movers driven by earnings releases and automaker updates. Hang Seng (+0.9%) and Shanghai Comp. (-0.5%) were mixed with the Hong Kong benchmark boosted by a surge in tech and strength in property, while the mainland lagged after another substantial PBoC liquidity drain.


• US equity futures (ES +0.5%, NQ +0.6% and RTY +0.6%) have extended on their post-FOMC gains with the NQ leading the charge. To recap, stocks initially benefitted from a combination of soft data (ADP and ISM manufacturing) and the Treasury Refunding Announcement. Thereafter, further upside was seen after Fed Chair Powell followed up on the FOMC’s (expected) decision to keep rates unchanged by downplaying the September dot plots (which pencil in an additional rate hike), whilst also acknowledging that increases in longer-term yields can have implications for monetary policy. For today’s docket, the macro calendar sees the release of weekly jobless data and factory orders, whilst the main earnings highlight comes via Apple after-hours with the Co. expected to report a fourth consecutive quarterly decline in revenues.

02 Nov 2023 - 08:55- Research Sheet- Source: Newswires