EUROPEAN EQUITY UPDATE: Stocks on track to close the week out with solid gains

Analysis details (09:20)

European equities trade flat/mixed (Stoxx 600 unch.) with the Stoxx 600 on track to close the week out with gains of just over 3% in what has been a solid start to the year for the region. Focus ahead for Europe is firmly on the Eurozone CPI release where a decline in the headline rate is widely expected, however, ING notes that policymakers may be more focused on the expected increase in the core rate. The session follows on from a mostly constructive APAC lead (ex-Japan) with Chinese property names once again in focus after Bloomberg reported that China could ease its “three red lines” for the sector. Stateside, US futures are largely unchanged with the major contract thus far unable to claw back much of the downside seen yesterday on Wall Street. The US Day Ahead features the crucial US jobs data for December; the expectation is for the headline rate of payrolls growth to cool; there will also be heavy attention on the unemployment rate and the average hourly earnings data, where the Fed wants to see wage pressures cool and the unemployment rate rise a bit to help manage inflation. The labour market report may take the sting out of the ISM services data due later in the afternoon as traders wind down for the week ahead of corporate earnings season getting into full swing next week when the banks begin reporting. On the speakers front, Fed’s Barkin (2024), Bostic (2024), and Cook (voter) will give remarks. Goldman Sachs has raised its price target on the Stoxx 600 to 465 from 450 (implies around 6% upside from current levels) citing a more favourable outlook for European equities on account of recent declines in gas prices and China’s reopening. Elsewhere, Citi is of the view that European equities are better positioned than their US counterparts for the forthcoming decline in earnings and has subsequently upgraded continental European stocks to overweight whilst lowering US stocks to underweight. In terms of price forecasts, Citi expects the Stoxx 600 to close 2023 out at 475 with an 8% gain and the S&P 500 at 4000 with a 5% gain. Sectors in Europe are mixed with Basic Resource and Energy names top of the leaderboard whilst Autos and Real Estate lags. In terms of stocks specifics, Shell (+0.8%) has cautioned that it sees around a USD 2bln impact from EU and UK taxes, whilst trading and optimisation in forecast to be “significantly higher” Q/Q. Stellantis (-1.7%) is lower following comments from its CEO that the Co. could idle additional manufacturing plants amid inflation and the cost of electrifying its vehicles. Swiss-heavyweight Roche (+1.2%) is top of the SMI after the US FDA granted priority review for its bispecific antibody, Glofitamab. Elsewhere, it’s been another busy day of broker moves, so please see our European equity sheet for full details.   

06 Jan 2023 - 09:20- Fixed IncomeData- Source: Newsquawk