EUROPEAN EQUITY UPDATE: Stocks remain buoyed by inflation optimism

Analysis details (09:35)

• European equities (Eurostoxx 50 +0.6%) trade on the front-foot following yesterday’s US CPI-induced gains and encouraging Chinese activity data overnight. From a macro perspective, today’s market narrative encompasses further disinflationary evidence, this time via the UK with headline Y/Y CPI falling to 4.6% from 6.7% (consensus looked for 4.8%) with the all-important services print declining to 6.6% vs. the MPC’s expectation that it would hold steady at 6.9%. The subsequent downside in the GBP has provided support for the FTSE 100 (+1.1%), which outperforms regional peers given the amount of overseas revenues generated abroad for the index. 


• Equity sectors in Europe are mostly firmer with the exception of Telecoms and Healthcare. To the upside, Consumer Products and Services are top of the leaderboard with some of the Chinese-exposed luxury names faring well; LVMH (+2.6%), Kering (+2.8%) and Hermes (+1.8%). Elsewhere, the Tech sector has been supported by post-earnings gains in Infineon (+6.5%) as strong demand for semiconductors helped support FY revenues. Siemens Energy (+5.6%) is another post-results gainer, albeit this may also be more of a continuation of the positivity seen in the wake of German government support efforts with the Co. announcing a EUR 487mln net loss. To the downside, Alstom (-12.5%) sits at the foot of the Stoxx 600 after the Co. reported declining H1 profits, lowered its FY23/24 guidance and noted it will not be paying a dividend.


• Asia-Pac stocks followed suit to the global risk-on mood after softer-than-expected US CPI data spurred dovish Fed repricing, while the region also digested better-than-expected Chinese activity data. ASX 200 (+1.4%) was led higher by notable outperformance in real estate and tech following a decline in yields and with the index unfazed by the acceleration in the Wage Price Index. Nikkei 225 (+2.5%) extended on gains throughout the session after it gapped above the 33,000 level alongside the broad heightened risk appetite. Hang Seng (+3.7%) and Shanghai Comp. (+0.6%) were underpinned after Chinese Industrial Production and Retail Sales topped forecasts, while sentiment is also supported by reports that China is mulling CNY 1tln of new funding to boost the housing market and after the PBoC conducted the largest MLF net injection in seven years.


• US equity futures (ES +0.3%, NQ +0.4%, RTY +0.5%) are trading firmer, continuing strength seen yesterday following the cooler-than-expected CPI data. Looking at the docket for today, US PPI and Retail Sales will be closely watched to see if other data releases align with the current “goldilocks” narrative. Energy traders will also be cognizant of two releases by the EIA, with last week's postponed data due to be released at 15:30 GMT / 10:30 ET and this week's at 18:00 / 13:00 ET. Away from data, both Fed’s Barr (Neutral, Voter) and Barkin (Neutral, 2024 Voter) are due to speak. On the earnings front, Target, TJX and Cisco are all set to release their earnings throughout the session. In terms of stock specifics, JD.Com ( +5.8%) are extending gains in the pre-market following its earnings. The Co. beat on its EPS metrics but reported a slight miss on revenue, though overall encouraging Chinese activity data overnight will likely support Co’s which operate in China; Alibaba (BABA, +2.9%), Baidu (BIDU, +2.2%), PDD (PDD, +2.7%) are all higher in pre-market trade.

15 Nov 2023 - 09:35- Research Sheet- Source: Newswires