EUROPEAN EQUITY UPDATE: Stocks sluggish ahead of ZEW sentiment data

Analysis details (09:30)

European equities (Eurostoxx 50 -0.2%) trade marginally lower following a mixed APAC lead which saw the Nikkei 225 (+1.2%) scale back some of yesterday’s declines whilst Chinese bourses were unable to garner much support from better-than-expected domestic GDP, retail sales and IP data. Macro focus in the European morning may centre around the upcoming ZEW release in which an improvement vs. the December release is expected. ING attributes the anticipated improvement to “the warmer-than-usual winter weather, reductions in gas prices, and surprising resilience of hard economic data”. Stateside, US futures (ES -0.2%, NQ -0.3%, RTY) are a touch softer but off worst levels with the ES holding above support at the 4k mark. Focus for the US today will be on large bank earnings (MS and GS report), while the January Empire Fed report may offer clues as to whether the more widely followed ISM data will rebound in January following December’s tumble into contraction (at both the headline and new orders level). Fed’s Williams (voter) speaks later in the session. Bank of America's January survey notes that global fund managers were the most underweight on US equities since October 2005, and most bullish on the Eurozone since February 2022. Allocators were overweight cash and bonds, and remained underweight global stocks with the biggest overweight in Emerging Markets since June 2021. Elsewhere, a note out from Citi has highlighted that “in the US net positioning is still only back to neutral, so while valuations may hold back the rally from here, positioning itself leaves plenty of room to run. European positioning has run further into bullish territory, but doesn’t look particularly extended either. China is showing the strongest bullish reversal and jump in positioning in the past week”. Sectors in Europe are mixed and relatively narrow in breadth with marginal outperformance in Basic Resources and Chemicals whilst Autos, Tech and Retail lag. Ocado (-5.8%) has acted as a drag for the former with the Co. recording flat revenue growth in Q4 and flagging potential negative H1 EBITDA. Renault (+0.7%) has been in focus after reports that Aramco is considering taking up to a 20% stake in the new Renault/Geely JV, whilst Nissan has reportedly agreed to proceed with a deal to rebalance its alliance with the Co. Finally, Hugo Boss (-2.2%) is softer on the session despite exceeding previously stated guidance in its FY results with JPM flagging that "Overall the buyside was already sitting ahead of Hugo Boss guidance".

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