EUROPEAN EQUITY UPDATE: Stocks inch higher as energy stocks recoup lost ground

Analysis details (09:40)

After a tentative start to trade, European equities (Eurostoxx 50 +0.6%) caught a bid with not much in the way of fundamental drivers behind the move. The session follows on from a mixed APAC lead whereby the region stuttered in its attempt to recoup some of its lost ground Monday after the downbeat China COVID updates over the weekend. On which, Bloomberg notes that COVID control restrictions now “weigh on a fifth of China’s economy”. In terms of macro drivers for Europe, with the exception of Austria’s Holzmann, the ECB’s GC appears to be angling towards a 50bps hike in December whilst engaging in discussions on how to unwind its balance sheet. Stateside, US futures were contained but have most recently extended to incremental highs alongside a broader modest risk move (ES +0.3%, NQ +0.3% and RTY +0.4%.); however, the ES remains stuck within yesterday’s 3937.5-3982 range. Fed speak continues to stress that more work needs to be done on inflation, albeit policymakers are leaning towards slowing the pace of hikes from the current 75bps cadence. Interestingly, 2024 voter Daly noted yesterday that the real-world impact of Fed rate hikes is likely higher than what the current rate target implies and that financial markets are acting like the current target rate is at around 6%, not 3.75-4.00%. Today’s US data docket sees the release of the Richmond Fed index at 15:00GMT with today’s speaker slate including 2022 voters Mester, George and Bullard. Sectors in Europe are mostly firmer with Energy (BP +5.5%, TotalEnergies +3.6%, Shell +3.1%) the notable outperformer after being the standout laggard yesterday with support today garnered from the recovery in crude prices after Saudi pushed back on talk that OPEC+ could look at increasing oil output. Likewise, Basic Resource names are also seeing a bounceback from yesterday’s losses, whilst Consumer Products and Tech lag. In terms of individual stories to be aware of, Shell (+3.1%) is considering its UK spending pledges and will push for an alteration to the expanded Energy Profits Levy. BBVA (+1.4%) has cancelled the sale of its depositary and custody business due to a "price discrepancy", according to sources via CincoDias. SocGen (-0.4%) and AllianceBernstein have announced a plan to form a JV to accelerate growth in cash equities. Finally, as part of its 2023-2035 strategy, Enel (-1.4%) has announced USD 21bln in asset sales.

22 Nov 2022 - 09:40- Research Sheet- Source: Newsquawk