EUROPEAN EQUITY UPDATE: Stocks softer as hawkish ECB pushback continues

Analysis details (09:25)

European equities (Eurostoxx 50 -0.8%) trade lower across the board in an extension of the downside observed yesterday. In terms of macro drivers for the region, ECB’s Knot (hawk) pushed back on reporting earlier in the week suggesting that the Bank could look to step down to a 25bps hike increment at the March meeting by stating that the GC is planning to hike by 50bps multiple times and will be in “tightening mode” until at least mid-year. The handover from APAC was a mixed one with underperformance in the Nikkei 225 (-1.4%) after markets mostly faded the BoJ-rally with many viewing the central bank’s decision to refrain from policy adjustments as a fleeting effort to delay the inevitable. Stateside, US futures are also on the backfoot (ES -0.4%, NQ -0.3%, RTY -0.3%) with the ES extending further south of the 4k mark to a low print for the session of 3930. Nascent hopes that the US economy can achieve a soft landing have been shaken by this week’s soft retail sales data, which missed expectations in December’s holiday spending season, as well as the soft industrial and manufacturing production data. Furthermore, central bank rhetoric this week continues to push the hawkish line, with Fed policymakers seemingly continuing to signal interest rate hikes to above 5.00%+ - this is more hawkish than market expectations, which sees the peak at 4.75-5.00%. Sectors in Europe are lower across the board with Energy and Basic Resources bottom of the pile amid declines in underlying commodity prices. In terms of stock specifics, Deliveroo (+1.2%) is firmer but off best levels following its Q4 update which showed a YY increase in GTV and the Co. stated that FY profitability is ahead of previous guidance. Other notable gainers include Accor (-2.1%) and Auto Trader (+1.9%) who have both benefitted from favourable broker moves. To the downside, BooHoo (-5.4%) is lower following a disappointing sales update, whilst Q4 results have weighed on Bankinter (-3.4%) of Spain. Finally, Glencore and Tata Motors are said to be among the potential bidders for the recently-collapsed battery firm Britishvolt, according to FT sources.

19 Jan 2023 - 09:25- Research Sheet- Source: Newsquawk