EUROPEAN EQUITY UPDATE: Stocks slip ahead of FOMC bonanza

Analysis details (09:35)

European equities (Eurostoxx 50 -0.5%) have staged a slight pullback following yesterday’s impressive CPI-inspired rally ahead of a slew of upcoming risk events. Macro updates from the region have been sparse aside from a softer than anticipated UK inflation release, which is unlikely to have too much bearing on expectations for the BoE to pull the trigger on a 50bps hike tomorrow. Overnight, APAC stocks benefited from risk-on tailwinds in wake of soft US CPI, though gains were of a contained nature. Focus remains on the COVID situation in China whereby cases are continuing to rapidly increase, though the government has reportedly decided against postponing its key economic policy meeting due December 15th-16th. US equity futures are a little better than flat ahead of today’s Fed announcement. That said, index levels have pared back from the highs seen in wake of yesterday’s CPI release. Some have theorised that the reaction was a function of traders getting ahead of market pricing, while others cited valuations, technical factors and profit-taking, given the outsized move. The Fed is expected to downshift the pace of its rate hikes to +50bps (from +75bps), and its updated projections are likely to show a higher terminal rate forecast; Chair Powell will also be grilled on how long the Fed intends to keep rates at peaks (he will probably premise it on incoming data). Sectors in Europe are mostly lower with Energy names the only sector firmer on the session amid gains in underlying crude prices. To the downside, Travel & Leisure is the clear laggard amid losses in Tui (-7.7%) after the Co. reported FY earnings and touted a potential EUR 1.6-1.8bln capital hike. Elsewhere, Inditex (+1.2%) is supported post-earnings after reporting beats on expectations for 9M sales and EBITDA metrics. Danske Bank (+2.7%) are another gainer after finally resolving its Estonian money laundering probe which will see the Co. forfeit USD 2bln. BT (+3.4%) is top of the Stoxx 600 after striking a 5yr deal with Nokia to improve the operator’s fixed access customer experience. To the downside, Watches of Switzerland sits at the bottom of the Stoxx 600 following HY results.

14 Dec 2022 - 09:35- Fixed IncomeData- Source: Newsquawk