EUROPEAN EQUITY UPDATE: Stocks on track for a week of gains

Analysis details (09:10)

• European equities (Stoxx 600 +0.2%) trade marginally firmer with the Stoxx 600 on track to close the week out with gains of around 3.3% in a week that has been dominated by soft US data, FOMC, BoJ and BoE rate decisions, softer yields and a busy corporate earnings slate. On the latter, analysts at Citi note that thus far, European earnings season has been disappointing with the first quarter of negative EPS growth since the pandemic. Key themes have included negative guidance, however, the desk observes that this does not always lead to meaningful downside for stocks. Back to today, European equity sectors are mostly firmer with Auto names top of the leaderboard following post-earnings gains in Volvo Cars (+6.3%) and BMW (+3.3%) with the latter bolstered by sales of premium vehicles. Elsewhere, the Real Estate sector has been supported by better-than-expected 9M results from Vonovia (+4.8%), whilst the Insurance sector has been dragged lower by earnings-induced downside in Axa (-2.5%). A.P. Moeller-Maersk (-9.1%) is another post-earnings loser with the Co. also announcing a 10k reduction in headcount in the wake of declining freight rates. Finally, Siemens Healthineers shares have been boosted by reporting from Bloomberg that the Co. is considering options for its in-vitro diagnostics unit, which could be valued at up to USD 8bln.


• Asia-Pac stocks traded higher as the regional bourses tracked the advances in global peers after the BoE kept rates unchanged and a surprise decline in US Labour Costs added to the dovish impulse, while the holiday closure in Japan and disappointing Caixin Services PMI did little to derail the momentum. ASX 200 (+1.1%) was led higher again by tech and real estate as yields continued to ease, with sentiment also helped by the surprise expansion in quarterly retail trade. KOSPI (+1.1%) was underpinned as participants digested earnings releases including blockbuster results from SK Innovation. Hang Seng (+2.6%) and Shanghai Comp. (+0.7%) conformed to the broad upbeat mood and largely shrugged off weaker Chinese Caixin PMI data and another substantial liquidity drain by the PBoC.


• US equity futures lean softer (ES -0.2%, NQ -0.4% and RTY +0.1%), though are not too far off neutral, and on a weekly basis, remain on course to mitigate last week’s losses. Much of how we close out the week will depend on today’s jobs report for October as well as the ISM services report due shortly afterwards. Tech giant Apple (APPL) slipped by over 3% afterhours following the publication of its Q4 earnings report, where it saw its first FY revenue decrease since 2019 as Q4 earnings slumped (the China sales fall is capturing a lot of attention) despite record iPhone and services revenue, and as investors remained concerned over the outlook for hardware. Elsewhere, BofA's weekly flows data saw its Bull & Bear Indicator drop to 1.4, the lowest since November 2022, giving a contrarian “buy” signal for a third week; within the data, US equities saw a third week of inflows (USD 500mln), EMs saw a fourth week of outflows (USD 2.8bln), while Europe saw its 34th week of outflows (USD 1bln).

03 Nov 2023 - 09:10- Research Sheet- Source: Newsquawk