EUROPEAN EQUITY UPDATE: Stocks slip as Powell pushed back on pivot and pause, next up the BoE

Analysis details (09:35)

Equities in Europe are softer across the board as European players react to the FOMC in which Fed Chair Powell ultimately flagged a higher terminal rate than previously expected. This sparked a selloff across US equities on Wall Street yesterday, before seeping into APAC markets and then reverberating into Europe. US equity futures have moved into modest negative territory in European hours after eking mild gains in APAC hours, with broad-based losses seen across the major front-month contracts, with the ES just above the 3,750 mark whilst the NQ found overnight resistance at 11,000. In terms of commentary, analysts at Citi believe “the next global EPS recession is about to begin, the 8th in the past 50 years… Our models suggest the MSCI World index is already pricing in a 5-10% earnings contraction, well below the 5% increase predicted by the analyst consensus for 2023.” Back in Europe, the major bourses are lower to varying degrees (Euro Stoxx 50 -1.2%; Stoxx 600 -1.2%) with the UK’s FTSE 100 (-0.8%) somewhat more cushioned in the run-up to the BoE policy announcement - expectations are for the MPC to lift rates by 75bps, but the decision could be subject to a split vote, and the focus will be on how committed the MPC is to further tightening (full Newsquawk preview available in the Research Suite). That being said, the gains in the FTSE 100 are driven by Grocery names after Sainsbury’s (+3.3%) earnings were well received – in turn lifting Tesco (+1.0%) in tandem, whilst the overall defensive nature of sectors keep heavyweight healthcare names AstraZeneca (+0.3%) and GSK (+0.2%) in the green. Sectors in Europe are in the red across the board but Banks cheer the higher yield environment, whilst some of the more defensive sectors reside towards the top of the bunch, whilst Real Estate, Travel & Leisure, and Tech sit at the other end of the spectrum. In terms of other earnings-related movers, BMW (-3.0%) expects its FY deliveries to be slightly lower, and Hugo Boss (-3.9%) falls despite upgrading its FY22 outlook. HeidelbergCement (-2.1%) warned that demand for building materials is weakening slightly. BNP Paribas (+2.7%) beat on revenue and net income but said its global banking revenue was impacted by markdowns of unsold positions in leveraged financing. ING (+5.5%) missed Q3 net expectations but beat on NII and announced a EUR 1.5bln share buyback. Finally, Uniper (-0.8%) expects a significantly negative FY adj. EBIT and Net Income for FY22, at levels significantly lower Y/Y.

03 Nov 2022 - 09:35- Research Sheet- Source: Newsquawk