EUROPEAN EQUITY UPDATE: Stocks lifted post-FOMC with the FTSE 100 outperforming helped by gains in Basic Resources

Analysis details (09:33)

• European equities (Eurostoxx50 +0.7%) are firmer with clear outperformance in the FTSE 100 (+2.0%) benefitting from gains in Basic Resources. The European session has continued the positive sentiment seen in the US, after the Fed’s dovish hold yesterday. Looking towards the rest of the day, markets will await BoE and ECB policy announcements, with President Lagarde also due to speak later in the afternoon. Consensus is for the two central banks to hold rates, a decision also carried out by the SNB, though the Norges Bank unexpectedly hiked by 25bps earlier today.


• European sectors are entirely in the green with the exception of Insurance; sectoral performance today is guided by lower interest rate expectations, which has led Real Estate to the top of the pile. Names such as Vonovia (+6.5%) and Leg Immobilien (+7.2%) are towards the best performers within the sector. Basic Resources is also benefiting from the positive risk tone and a weaker Dollar, which has helped to lift the likes of Rio Tinto (+3.6%), Anglo American (+6.5%) and Glencore (+3.8%) – explaining the outperformance seen in the FTSE 100. Completing the Top 3 is Travel & Leisure, lifted by Air France (+6.9%), after the Co. revised its Op margin outlook to above 8% in 2026-2028 (prev. guidance 7-8%). Insurance, the only sector in the red, is eking marginal losses – a sector that typically moves inversely to interest rate expectations; Munich Re (-2.2%), Allianz (-0.5%) and Zurich Insurance (-0.7%) are all suffering. In terms of individual movers, Vivendi (+7.6%) is gaining after the Co. announced it will study a project to split its activities into several entities. To the downside, Wolters Kluwer (-1.3%) is hampered following a downgrade to Sell from Neutral at Citi.


• Asia-Pac stocks were mostly higher with sentiment underpinned in reaction to the FOMC which kept rates unchanged but provided a dovish tweak to the statement guidance and cut its 2024 median dot by more than expected. ASX 200 (+1.7%) was lifted with gains led by the rate-sensitive sectors after a fall in yields and with participants also digesting the latest jobs data which showed a much larger-than-expected increase in headline employment change. Nikkei 225 (-0.8%) was initially boosted but then failed again to sustain the 33,000 level and wiped out all its gains amid losses in the banking sector and headwinds from a stronger currency. Hang Seng (+0.8%) and Shanghai Comp. (-0.3) were both lifted at the open with the former underpinned after the HKMA kept rates unchanged in lockstep with the Fed, while the gains in the mainland were limited after the latest loans and aggregate financing data missed estimates.


• US equity futures (ES +0.2%, NQ +0.3%, RTY +0.4%) are trading higher after a dovish FOMC policy announcement on Wednesday, where the US central bank signalled that three 25bps rate cuts were coming in 2024, with Chair Powell confirming that rates were unlikely to be hiked further, and the Fed was very focussed on not making the mistake of keeping rates too high for too long. Back to today, the docket is packed with some important data releases, including US Retail Sales, weekly IJCs and US Import & Export Prices. In terms of individual movers, Adobe (-5.9%) is lower in the pre-market after the Co. announced a beat on its results, though its FY24 Adj. EPS guidance missed expectations.

14 Dec 2023 - 09:39- Research Sheet- Source: Newsqawk