EUROPEAN EQUITY UPDATE: Stocks granted mild reprieve from recent losses

Analysis details (09:43)

• European equities (Eurostoxx +0.3%) are firmer in early European trade, albeit it is hard to see today’s bounce as much more than a reprieve from recent losses with not a great deal changing since yesterday’s close other than a rebound in Chinese industrial profits which helped buoy sentiment overnight. The issue for the region and global equities more broadly has been a lack of positive inflection points with markets broadly concerned by the "higher for longer" narrative out of the Fed and rise in global bond yields. Until any data comes along to reverse this, it appears that sentiment will remain sullied.


• Analysts at Barclays noted that angst over inflation prompted a rush to commodities and cash, however, there was no exodus from equities as investors are well hedged. The desk adds that defensive positioning reflects lower growth expectations, however, it is higher real rates that is hitting equities. Finally, Barclays notes that while “bonds look more reasonably priced now, Growth-to-Value rotation still lags”.


• Asia-Pac stocks traded mixed as a rebound in Chinese Industrial Profits partially offset the subdued handover from Wall St. where the major indices extended on losses heading closer to month-end and in the absence of any major catalysts stateside. ASX 200 (-0.1%) was lower albeit with downside stemmed as participants digested the monthly CPI data from Australia which matched expectations at 5.2% Y/Y but accelerated from the prior. Nikkei 225 (-0.1%) was the underperformer and briefly dipped beneath the 32,000 level before bouncing off its lows. Hang Seng (+0.4%) and Shanghai Comp. (+0.3%) were positive after the PBoC pledged to step up policy coordination at its monetary policy meeting for Q3 and noted the need to enhance efforts of macro policy adjustments, while sentiment was also underpinned by the improvement in Industrial Profits which returned to growth for August.


• US equity futures (ES +0.4%, NQ +0.4%, RTY +0.5%) are trading firmer, with sentiment improving following yesterday's sell-off, which was ultimately void of any pertinent data releases. The docket remains lacklustre for the remainder of the day, with a focus on US MBAs and Durable Goods. Fed’s Kashkari is also due to speak again on CNBC at 13:30 BST / 08:30 ET and traders will await earnings from Micron (MU), after market close. Overall, the light schedule could lead the markets to be dictated by recent themes including higher rates, potential Government Shutdown issues and month-end flows. In terms of stock specifics, Costco (-1.7%) is extending losses in pre-market trade, despite beating on its results reported yesterday. Some desks have attributed the weakness to the Co. delaying an increase in its membership prices, with the CFO suggesting it is a matter of “when, not if”. Staying within the sector, Target (-2.5%) is also trading lower, with investor sentiment hampered following reports from Bloomberg that said the Co. is closing nine stores across four states due to theft and crime.


• Equity sectors in Europe are mostly firmer with Tech top of the pile as ASM International (+2.9%) enjoys a bounce-back from yesterday’s losses with the Co. also recently noting “Co. expects equipment revenue coming from China definitely to be higher this year than at the end of 2022”; other gainer include Autos and Banks. To the downside, Utilities sit at the foot of the leaderboard with Centrica (-3.4%) a laggard within the group after being downgraded to equal weight from overweight at Morgan Stanley. In terms of individual movers, H&M (+6.5%) is the best performer in the Stoxx 600 after reporting better-than-expected Q3 operating profits, whilst Adyen (+5.6%) has been boosted by a broker upgrade at Barclays. On a less positive footing, NN Group (-9.2%) is the worst performing stock in the Stoxx 600 after being subject to an unfavourable court ruling. Elsewhere on the subject of litigation, UBS (+0.6%) is seeking to wipe out EUR 1.8bln tax fine at France's top court, according to Bloomberg.

27 Sep 2023 - 09:43- Research Sheet- Source: Newswires