EUROPEAN EQUITY UPDATE: Stocks slip as the October rally peters out

Analysis details (09:44)

European equities have paused for breath (Eurostoxx 50 -0.8%, Stoxx 600 -0.8%) from the solid start to the month observed on Monday and Tuesday. The APAC session was a mostly upbeat one given the gains on Wall St. yesterday which saw major indices post their biggest two-day rally since April 2020. The Hang Seng was the clear outperformer to the upside overnight, however, this was more a by-product of a catch-up play given that the index was closed on Monday. There hasn’t been much in the way of fresh fundamentals behind the pullback in Europe with the downside likely a by-product of traders just scaling back some of the enthusiasm to buy stocks at the start of the week. Final PMIs for the Eurozone made for grim reading with the composite metric in contractionary territory and S&P Global noting that "Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated". Stateside, US futures are also on the backfoot (ES -0.8%, NQ -0.8%, RTY -1.1%), albeit still comfortably firmer on the week. This week’s gains have been based on speculative hopes that the Fed could ease up on its hawkish monetary policy after a soft September Manufacturing ISM data on Monday, JOLTs data for August falling and undershooting expectations on Tuesday, all amid some nascent calls from some institutions like the IMF and the World Bank urging the Fed to be more cognizant of the impact its policy has on other nations. Back to Europe, sectors are lower across the board with underperformance in Autos, Telecoms and Banking names with Credit Suisse (-2%) remaining a source of focus for the latter amid ongoing speculation over the health of the Bank. The latest reports surrounding the Co., according to FBN’s Gasparino, suggest the SNB has weighed merging Credit Suisse with another bank such as UBS, albeit Gasparino noted it is unclear if there's official talks or this is just rumblings. Elsewhere, Tesco (-2.6%) is seen lower on the session following its H1 update in which it flagged that it now expects FY profits to be at the lower end of its previously guided range amid significant cost inflation. Finally, in M&A activity, Philip Morris said it expects EU antitrust approval for its USD 16bln bid for Swedish Match in late October.

05 Oct 2022 - 09:44- Fixed IncomeResearch Sheet- Source: Newsquawk