EUROPEAN EQUITY UPDATE: Stocks gain though FTSE 100 underperforms hampered by Basic Resources

Analysis details (09:34)

• European equities (Eurostoxx50 +0.3%), are mixed, with the FTSE100 (-0.2%) the relative underperformer, largely hampered by losses in Basic Resources. In the session so far, ECB’s Schnabel (Hawk) said the current level of restriction is sufficient and that further hikes are “rather unlikely” after the November inflation data – and with markets almost entirely pricing in a first rate cut at the ECB in the March meeting, Schnabel’s comments sparked further optimism in the bond markets. On that note, Deutsche Bank’s Reid mentions that “this isn’t the first time this year that rate cut speculation has built up”, adding that “markets have lost a little of their recent poise over the last 24 hours”. As for data, PMI data across the board (bar Spain) showed a mild upward revision, though remained comfortably within contractionary territory. The overall outlook on economic activity remains dire, with Germany noting that “our GDP nowcast model signals negative growth for the fourth quarter. This would mean that Germany is in a recession after having registered a 0.1% drop in the third quarter”. There is little left on the agenda for the European session, so attention will turn to US JOLTS and ISMs in the afternoon.


• European sectors are mixed with a slight positive tilt; Real Estate is the main outperformer following broker upgrades at British Land (+1.3%) and Land Securities (+0.8%). Goldman Sachs put Real Estate in focus in its most recent note, suggesting that ECB rate cuts in 2024 will help “maintain resilient operating trends for landlords”. Energy and Construction & Materials are also towards the top of the pile, though the breadth of the market to the upside is fairly narrow. Basic Resources is found at the foot of the sectors, largely weighed on by lower commodity prices – which suffer from a broader downbeat sentiment in China. Anglo American (-1.9%) is the main casualty, whilst Rio Tinto (-0.9%) fares off a little better following a broker upgrade at BNP Paribas. The main story for today involves Ericsson (+8.7%) and Nokia (-8.3%), after AT&T (T), announced that it had selected Ericsson to construct a telecom network, which will see the Co. dropping its current provider Nokia. The pair are the best and worst performing stocks in the Stoxx 600 respectively. As for individual movers, SSP (+4.1%) is firmly in the green after the Co. beat on its results, whilst Carl Zeiss Meditec (-4.7%) suffers from a broker downgrade at JP Morgan.


• Asia-Pac stocks declined following the mostly negative lead from Wall St where the major indices were choppy and ultimately weighed amid a rebound in yields ahead of key data releases. ASX 200 (-0.9%) was led lower by the commodity-related industries with underperformance in gold miners after the precious metal faded the recent surge, while sentiment was also not helped by weak data and after the unsurprising RBA rate decision in which the central bank kept rates unchanged and reiterated its forward guidance. Nikkei 225 (-1.3%) continued to weaken and slipped below the 33,000 level despite softer-than-expected Tokyo inflation data. Hang Seng (-2.1%) and Shanghai Comp. (-1.6%) retreated which saw the latter test the 3,000 level to the downside amid lingering frictions after China criticised the US for seeing it as a threat following calls by Commerce Secretary Raimondo for more funds to back chip curbs, while encouraging Caixin Services PMI data which printed a 3-month high at 51.5 (exp. 50.7) only provided a brief tailwind. Later in the session, Moody’s changed it outlook to Negative from Stable reflecting risks relating to persistently lower medium-term economic growth and ongoing downsizing of the property sector.


• US equity futures (ES -0.2%, NQ -0.4%, RTY Unch.) are trading on the backfoot, though the Russell attempts to hold onto the prior days’ advances. Today marks some key data with Final US composite and services PMIs from S&P Global which will be released ahead of the Services ISM, where the headline is expected to slightly tick up to 52.0 from 51.8. JOLTs data will be eyed ahead of Friday’s official jobs report (note: the JOLTs data is for October, while Friday’s NFP results will be for November). Away from data, markets will await earnings from Autozone and JM Smucker.

05 Dec 2023 - 09:37- EquitiesData- Source: Newsquawk