EUROPEAN EQUITY UPDATE: Stocks slump as investors question the YTD rally

Analysis details (09:24)

European equities (Eurostoxx 50 -1.2%) have kicked the week off on the backfoot following the losses on Wall Street on Friday afternoon post-payrolls. Incremental macro drivers for the region have been lacking and therefore, stocks have succumbed to the downbeat APAC handover which saw Asian stocks lower; Japan outperformed on reports that BoJ's Amamiya (considered dovish) was sounded out to be the next Governor, though an official later denied this. US equity futures (ES -0.6%, NQ -0.8%, RTY -0.6%) are lower, with the tech heavy/yield sensitive Nasdaq-100 leading losses as the hangover from last week’s hawkish payrolls report continues, while sentiment in large cap tech was shaken following glum earnings updates. Goldman Sachs told its clients that an improvement in US and global macro data, which has boosted the S&P 500 by 8% YTD, has led it to lift its 3-month S&P 500 target to 4,000 from 3,600. But the bank is still maintaining its year-end projection for 4,000, slightly below current levels. "A soft landing – and in fact above-trend growth – is already priced in US equities," GS writes. Morgan Stanley's notable bearish strategist Mike Wilson has also reiterated his cautious view for stocks ahead, and said that markets will end up pricing a much lower view than the consensus and reverse gains seen recently, though added that the process could take longer than he originally anticipated. Elsewhere, JP Morgan sees US stocks as unattractive and recommends remaining long Europe vs. the US, as well as holding an overweight FTSE 100 position. Sectors in Europe are mostly lower with Technology, Real Estate and Retail lagging peers. In terms of stock specifics, Renault (+0.2%) has been in focus after striking an agreement with Nissan to reshape their alliance (details of which can be found here). Aurubis (-5.7%) is bottom of the Stoxx 600 post-earnings after higher energy prices weighed on profits. Elsewhere, broker moves for the UK banking sector from Barclays saw an upgrade for Lloyds (-0.8%) and downgrades for NatWest (-1.7%) and Virgin Money (-2.3%).

06 Feb 2023 - 09:24- EquitiesResearch Sheet- Source: Newsquawk