EUROPEAN EQUITY UPDATE: Stocks firmer as markets brace for all-important CPI

Analysis details (09:20)

European equities (Eurostoxx 50 +0.5%) trade on the front-foot with not a great deal in the way of fresh macro impulses for the region to digest asides from the European Commission nudging higher its 2023 EZ growth forecast higher to 0.9% from 0.3%. The handover from the APAC region was a mixed one with focus on mounting US-Sino relations after the US military downed a fourth flying object after it flew in proximity to sensitive military sites. China responded by claiming that since last year, US high altitude balloons had flown over Chinese airspace on 10 occasions without permission. Stateside, US futures (ES, NQ and RTY are all near unch.) trade flat with traders mindful of this week’s big risk events, which include US CPI, retail sales, as well as other potentially global-relevant events in G10. Analysts at SocGen have cautioned that risks are increasing for European stocks whereby a pickup in earnings of PE expansion would be required for the market to carry on rising; something which the desk does not expect. SocGen forecasts the Stoxx 600 to trade in a range of 400-460 (currently 459). Goldman Sachs states that European equities are cheaper than those in the US across all sectors and therefore have the potential to extend outperformance vs. US peers. MS strategist Wilson has cautioned that US stocks are primed for a sell-off after being early in their view that the Fed will pause its rate hiking cycle; sees the S&P 500 at 3900 by year-end (currently 4090). Sectors in Europe are mostly firmer with outperformance in Travel & Leisure, Construction, Consumer Products leading peers, whilst Energy and Real Estate names lag. The latter has been subject to a slew of negative broker moves at Deutsche Bank which has weighed on the likes of Taylor Wimpey (-1.9%), Barratt Developments (-1.2%) Persimmon (-2.4%), Crest Nicholson (-3.1%). Elsewhere, Orpea (+16.2%) shares are surging post-Q4 results, Credit Suisse (-2.3%) has been weighed on by a broker downgrade at Kepler Cheuvreux and Telecom Italia (+1%) has been in focus following reports that the Italian government could look to buy a 20% stake in the Co.’s network unit for some EUR 2bln in order to keep oversight of the asset.

13 Feb 2023 - 09:20- Research Sheet- Source: Newsquawk