EUROPEAN EQUITY UPDATE: Stocks perky post-Powell

Analysis details (09:35)

European equities (Eurostoxx 50 +0.4%) benefited at the cash-open from the post-Powell surge in US stocks which saw the S&P 500 close with gains in excess of 3%. Fresh macro drivers for Europe have been lacking thus far and therefore some of the enthusiasm at the cash open has scaled back somewhat. It’s worth acknowledging that despite the dovishly-perceived tone in Powell’s speech yesterday, ECB policymakers are yet to offer indication of a pause in its rate hiking cycle despite a potential step down in the magnitude of rate hikes in December. As such, drawing a direct parallel between Fed and ECB tightening ambitions might not be wise at this stage. Sentiment has also been supported by the encouraging APAC handover whereby Chinese stocks advanced after several large Chinese cities relaxed some COVID controls and Vice Premier Sun Chunlan noted that the country’s fight against the virus is entering a new phase, while the latest Caixin Manufacturing PMI data topped forecasts, although remained in contraction territory. Stateside, US futures (ES -0.1%, NQ -0.3%, RTY unch.) are flat/softer as markets pause for breath following yesterday’s impressive rally which took the ES to just shy of the 4.1k mark. The next inflection point for US equities ahead of tomorrow’s NFP print could come via today’s PCE report with metrics set to cool; a view that was endorsed by Fed chair Powell on Wednesday. Elsewhere, the ISM manufacturing data may fall beneath the neutral 50.0 level. A recent poll by Reuters revealed analysts are of the view that macro fundamentals will be the main driver for stock markets to snap back into an uptrend. The consensus view is that the S&P 500 will end next year at 4,200; JPMorgan overnight updated its forecasts, and is in line with that consensus view. The bank sees S&P 500 EPS at USD 205 next year, lowering its forecast from USD 225, and warned that the index could test 2022 (around the 3,577 mark) in the first half of next year. Sectors in Europe are mostly firmer with Tech stocks following suit to the strong showing during US hours yesterday, whilst Real Estate names are also posting solid gains. To the downside, Autos, Consumer Products and Energy names are the only sectors in the red. Noteworthy individual movers are somewhat lacking with Atos (+3.9%) shares supported after announcing a multi-year partnership with Amazon, whilst Heineken (+2.2%) is firmer on the session following its 2023 update in which it flagged that it will raise beer prices amid higher input costs.

01 Dec 2022 - 09:35- Research Sheet- Source: Newsquawk