EUROPEAN EQUITY UPDATE: Stocks set to close the week out with modest losses

Analysis details (09:30)

European equities (Stoxx 600 +0.3%) trade with modest gains in what is set to be a week of minor losses for the Stoxx 600, albeit the index is still up 6.1% YTD. Fresh macro drivers for the region are lacking for the region in the aftermath of recent pushback from ECB officials on reporting that policymakers could look to step down its pace of rate hikes by March. The handover from the APAC region was a mostly constructive one with Chinese stocks supported ahead of the Lunar New Year holiday and after this week's record liquidity injection with mainland bourses to remain shut throughout the whole of next week. US futures (ES +0.1 NQ +0.3%, RYT -0.1%) are mixed/flat with the ES hovering around 20 points north of the 3900 mark. Netflix (+5.9% pre-market) reported Q4 results after-hours and posted a miss on EPS, in-line revenues and a notable beat on net subscriber additions, whilst announcing its co-founder Hastings is to step down as CEO. The US Day Ahead will feature commentary from the Fed’s 2023 voter Harker, who has spoken a few times in recent days; remarks from Fed Governor Waller may be more interesting; he tends to err on the hawkish side, and his comments will hit after the European close. The latest BofA Flow Show revealed that equity funds saw USD 7.5bln of inflows with the regional breakdown as follows: Europe USD 0.2bln inflows (first in 49 weeks), US USD 5.8bln outflows (3rd week), Japan USD 32mln outflows, EM inflows USD 10.2bln (5th week). BofA strategists state “positioning says pain trade in stocks has further to go on upside”; recommends fading any move in the S&P 500 toward 4200. Sectors in Europe are mostly firmer with outperformance in Energy and Travel & Leisure whilst Food Beverage & Tobacco and Healthcare lag. In terms of individual updates, Ericsson (ERICB SS) -5.4.% is softer on the session after disappointing Q4 results in which it flagged that it sees Q1 2023 adj. EBTIDA coming in somewhat lower than in 2022. Siemens Energy (-1%) is off worst levels but ultimately softer after flagging that it expects to report a significant net loss this year. On a more positive footing, SSE (+1.9%) shares are firmer after raising its FY22/23 adj. EPS forecast to above GBP 1.50 (exp. GBP 1.30; prev. above GBP 1.20), whilst Sandvik (+2.8%) is one of the better performers in the region post Q4-results.

20 Jan 2023 - 09:30- Research Sheet- Source: Newsquawk