EUROPEAN EQUITY UPDATE: Stocks slip in catalyst-thin trade

Analysis details (09:30)

• European equities (Eurostoxx 50 -1%) trade on the backfoot with indices extending on opening losses which were prompted by the selling pressure on Wall St. in the US afternoon. From a macro perspective, the main focus has been on UK GDP metrics which saw a M/M increase in July of 0.5% (vs. Exp. 0.2%), leaving the Q2 Q/Q print at 0.2% (vs. Exp. flat). As such, pricing for the BoE’s September meeting has moved in a slightly more hawkish direction with a 25bps hike now seen at around 69% vs. roughly 60% pre-release; it’s worth noting that UK jobs, CPI and retail sales data are all due on the docket next week. Asides from that, fresh macro impulses have been lacking with markets feeling like they are somewhat in “summer mode” at the moment.


• Asia-Pac stocks traded mostly lower after the post-CPI dovish unwind seen stateside and amid Chinese developer concerns, with trade also hampered by thinned conditions with Japanese participants away for Mountain Day. ASX 200 (-0.2%) was lacklustre with the upside in consumer stocks negated by the losses in the commodity-related sectors, while RBA Governor Lowe’s testimony provided very little in the way of fresh insight in which he reiterated that further tightening may be required but will depend on the data and the outlook with monetary policy in restrictive territory. Hang Seng (-0.9%) and Shanghai Comp. (-2.1%) declined with developers pressured including Country Garden Holdings after it flagged a loss of up to CNY 55bln for H1 and hired CICC for debt restructuring. Furthermore, shares in Fantasia Holdings dropped more than 50% on resumption of trade after being halted since March last year, while participants also await details from the securities regulator’s emergency meeting with developers and financial institutions. Conversely, Alibaba, China Mobile and Li Ning are among the best performers in Hong Kong following their results including the beat on top and bottom lines by China’s e-commerce giant.


• US equity futures (ES, NQ & RTY Unch.) are trading flat following yesterday’s dovish CPI print. Looking at the inflation data, headline MM rose by 0.2% (prev. 0.2%), while the YY accelerated to 3.2% (prev. 3.0%), though markets were expecting a slightly hotter print at 3.3%. Though it can be noted that the Fed, which returns from its summer break in September, will still have to digest one more CPI release and another NFP report, before making its next policy decision. Additionally, weekly initial jobless claims data jumped above expectations in the week, and although it can be a choppy series, highlights market (and official) expectations that the labour market will begin loosening in the months ahead, and that will slow economic growth, which will eventually lead to the Fed having to dial down hawkishness to support the economy. The calendar for today is thin, with a focus on PPI data and the Prelim UoM survey, particularly on inflation expectations.


• Equity sectors are mainly in the red today, with only Telecommunications and Financial Services marginally in positive territory. The former is propped up by Telecom Italia (+1.9%) after Bloomberg reported that Italy is to get up to 20% of Telecom Italia Network in a KKR deal, a bid worth EUR 23bln. Additionally, there is seemingly broad-based strength within the sector with names such as Swisscom (+1.1%), Deutsche Telecom (+1%), and KPN (+0.4%) all trading higher. Financial Services is kept just about afloat with help from UBS (+3.7%) who announced it will terminate its CHF 9bln Loss Protection Agreement with the Swiss Government and Public Liquidity Backstop with SNB. Towards the downside, Basic Resources are underperforming on general weaknesses in the metals markets. In terms of individual movers, Bechtle (+5.8%) is the best-performing Co. in the Stoxx600 after reporting a strong set of earnings, whilst Lotus Bakeries (+2.4%) also benefits following its results. A broker downgrade for Holmen (-3.8%) has led its shares to trade lower whilst an upgrade for Henkel (+1.6%) has helped its shares.

11 Aug 2023 - 09:30- Fixed IncomeData- Source: Newsquawk