EUROPEAN EQUITY UPDATE: Stocks mixed as opening gains fade

Analysis details (09:25)

• European equities (Eurostoxx 50 +0.2%) initially traded mostly firmer in an extension of Monday’s gains before pulling back in recent trade. The main data release thus far (ahead of German ZEW at 10:00BST) has come in the form of the latest UK jobs metrics. The release saw the unemployment rates unexpectedly tick higher to 4.0% from 3.8% and the HMRC payrolls change for June decline to -9k. However, the bulk of the focus has been on another set of hot wages data with headline wage growth in the 3M/YY period to May rising to 6.9% from 6.5%. Accordingly, pricing for the BoE’s August rate decision has leaned further towards a 50bps hike from the MPC with odds in favour of such a move at around 70%.


• Asia-Pac stocks were mostly positive following the tailwinds from the US while participants also reflected on China's support efforts. ASX 200 (+1.5%) was led higher by the tech and mining-related industries, with risk sentiment also facilitated by an improvement in Westpac consumer confidence and NAB business surveys. Nikkei 225 (Flat) was the laggard and failed to sustain early momentum with the upside capped by a firmer currency. Hang Seng (+0.9%) and Shanghai Comp. (+0.5%) conformed to the upbeat mood as developers benefitted from news that China will extend two financial policies supporting the stable and healthy development of the real estate market to the end of 2024.


• US index futures are trading a little above neutral following Monday’s gains, which were underpinned by the Manheim Used Car survey and the NY Fed’s Survey of Consumer Expectations both showing cooling near-term prices. Both of these data have eased fears going into Wednesday’s CPI data. For today, the NFIB small business optimism index, and the weekly RedBook are due in US premarket trade. After the open, the IBD/TIPP economic optimism index will be released. On the speakers’ slate, Fed hawk Bullard (non-voter) will deliver remarks on the US Economy and Monetary Policy before the cash equity open. The Fed’s discount rate minutes will also be out in the afternoon. From a sector standpoint, RBC raised financials to overweight from market weight, and downgraded utilities to market weight from overweight.


• Equity sectors in Europe have a positive bias with Basic Resource names top of the pile following upside in underlying commodity prices with Construction and Consumer Products & Services names also on the front foot. To the downside, Autos & Parts and Media names lag with Volkswagen (-1.3%) acting as a drag on the former following reporting from Handelsblatt that in the private customer segment, incoming orders in Germany are well below the planned annual target. Furthermore, Michelin (-1.3%) shares are on the backfoot following a broker downgrade at Jefferies. In terms of stock specific updates, Kingspan (+10.6%) is the best performing stock in the Stoxx 600 after stating that it expects to report a record H1 23 trading profit and is positioned favourably heading into Q3. Elsewhere, Evotec (+3.9%) has benefited from entering into a licensing agreement with Bristol Myers Squibb, whilst Daimler Truck (+2%) shares are on the front foot after raising FY 23 revenue guidance following strong Q2 sales figures.

11 Jul 2023 - 09:25- Fixed IncomeData- Source: Newsquawk