EUROPEAN EQUITY UPDATE: Stocks hold onto gains amid the global rally and traders await the next macro catalyst

Analysis details (10:08)

Equity bourses in Europe trade with gains across the board but off session highs with the optimism across global markets seeping back into Europe following a rally on Wall Street yesterday and a largely firmer showing from APAC markets overnight. The risk-on sentiment is seemingly emanating from a combination of mostly positive US earnings coupled with reprieve in the UK markets as the unfunded budget was slashed, whilst the recent sell-off across equity markets could’ve also prompted a technical bounce in the absence of catalysts – as per recent commentary via Morgan Stanley’s Wilson who said he “would not rule out” the S&P rising to about 4,150, but ultimately sees the S&P 500 bottoming around 3,000-3,200. US equity futures are firmer to a greater magnitude than their European counterparts, with the ES trading on either side of 3,750 whilst the NQ outperforms its peers (ES +1.1%, NQ +1.3%, RTY +1.0%). The US earnings docket is getting busier with today’s earnings including DJIA components Goldman Sachs (6.7% weighting – 2nd largest) and Johnson & Johnson (3.6% weighting), whilst FAANG stock Netflix is poised to report after the bell. Back in Europe, cash and futures hold onto earlier gains (Euro Stoxx 50 +0.9%; Stoxx 600 +0.5%), but the Stoxx 600 sees gains to a lesser extent as heavyweight Roche (2.3% weighting in Stoxx 600) falls some 1.5% after missing revenue forecasts – in turn causing the Swiss SMI (+0.5%) to lag in the region. The FTSE 100 (+0.9%) meanwhile sees financial names towards the top index as the FT reported that the BoE is set to further delay quantitative tightening until gilt markets calm - although this has been rebuffed by the BoE, whilst gains in the index are capped by miners (Rio Tinto -1.0%, Fresnillo -1.4%) after Rio Tinto forecasted annual iron ore shipments at the lower end of guidance and sees further downside risks to demand as the global economy slows – thus the Basic Resources sector lags in Europe. Overall, the sectoral performance is mostly firmer with no overarching theme. Autos & Parts, Banks, Financial Services, and Industrial Goods lead the charge whilst Healthcare, Optimised Personal Care, Energy and Basic Resources sit at the bottom of the pile. In terms of individual movers, Telecom Italia (+7%) soars as CVC is reportedly considering a takeover offer for the Co., according to Milano Finanza citing sources. Sticking with M&A, (-12%) tumbles despite reports that talks have begun with potential buyers, possibly as the board said any firm offer would require interim financing to be put in place as the Co. needs some GBP 70mln of funding during the next 18 months. Elsewhere, THG (+9.5%) rises in spite of reports Softbank (9434 JT) is offloading its 6.4% stake in THG for around GBP 31mln. 

18 Oct 2022 - 10:14- Research Sheet- Source: Newsquawk

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