EUROPEAN EQUITY UPDATE: Stocks soft and on track for a week of sizable losses

Analysis details (09:25)

• Stocks in Europe are once again on the backfoot (Stoxx 600 -0.8%) with the Stoxx 600 on track to close the week out with losses of around 3%. Losses for the complex have been via a myriad of factors including, surging bond yields, geopolitical angst and a busy corporate earnings slate. For today’s session there has been a lot of focus on the European consumer sector with Bruno Cucinelli (+3.8%) top of the Stoxx 600 after well-received 9M earnings and an increase to its FY23 revenue guidance. At the other end of the spectrum, Salvatore Ferragamo (-3.5%) is on the backfoot after reporting a drop in 9M sales and with the CEO noting they do not see potential for major improvements for sales growth in the near term; other consumer-related earnings include L'Oréal (-0.5%) and EssilorLuxottica (-0.4%). From a sectoral standpoint, Basic Resources are the clear laggard in Europe, followed by Travel & Leisure amid post-earnings losses in IHG (-3.1%). Healthcare is the only sector in the green in what appears to be more of a bounceback from yesterday’s Roche-led losses. UBS (-3%) is reportedly preparing for the next wave of job cuts, with the group reportedly eyeing 10% of support staff, according to Bloomberg.


• APAC stocks mostly declined after the losses on Wall St where the curve steepened as markets digested various comments from Fed Chair Powell and with sentiment pressured by the escalating geopolitical situation. ASX 200 (-1.2%) was dragged lower with broad weakness seen across all sectors aside from energy which is kept afloat by the geopolitical risk premium uplift in oil prices. Nikkei 225 (-0.5%) retreated at the open but then gradually pared its losses amid reports of potential temporary income tax cuts and with participants also digesting the latest Japanese CPI data which printed mostly firmer than expected but softened from the previous month’s pace. Hang Seng (-0.7%) and Shanghai Comp. (-0.7%) were subdued albeit with the downside cushioned after the PBoC’s actions in which it unsurprisingly maintained its benchmark lending rates but boosted liquidity in the interbank market with its largest-ever open market operation net daily injection.


• US equity futures have extended the downside seen during yesterday’s session with the ES (-0.2%) moving below the 4300 mark. The highlight of yesterday’s session came via Fed Chair Powell, who initially adopted a dovish tone by noting the Fed is proceeding carefully and is attentive to the move higher in bond yields before making hawkishly perceived comments that he believes policy is not too tight. The after-hours earnings slate yesterday was a quieter one with focus for today’s pre-market docket seeing reports from RF, SLB and AXP. Earnings from the latter will be of great importance to the market given comments earlier in the week from Bank of America which highlighted that US consumer spending is slowing. Some desks have also made the observation that such comments are in contrast to hard data such as Tuesday’s hot US retail sales print, therefore any further clarity on the state of the consumer will be of use to the market, particularly given today’s light macro calendar which is devoid of tier 1 macro releases. The speaker slate includes 2023 voter Harker and 2024 non-voter Mester, albeit at this stage given the sheer volume of Fed speak we have seen this week it is hard to see their comments having a material impact on the market.

20 Oct 2023 - 09:25- Fixed IncomeData- Source: Newsquawk