EUROPEAN EQUITY UPDATE: Stocks stronger as Stoxx 600 unwinds WTD losses

Analysis details (09:24)

• European equities (Stoxx 600 +0.8%) are trading higher across the board with the Stoxx 600 now virtually flat week-to-date after yesterday’s positive session has helped erase losses earlier in the week. One area of positivity for the region today has come via softer-than-expected inflation metrics from France whereby Y/Y CPI remained at 4.9% vs. expectations of an increase to 5.1%, whilst the M/M rate fell to -0.5% from 1.0% (vs. exp. -0.3%). This allied with yesterday’s larger-than-expected cooling in German metrics augurs well ahead of the Eurozone-wide metric due at 10:00BST whereby consensus (which may now be viewed as slightly stale) had looked for a decline in the Y/Y rate to 4.5% from 5.2% and a drop in the ex-food & energy print to 4.5% from 5.2%. Such a cooling would likely cement expectations for the ECB to pause its rate hiking campaign in October.


• Asia-Pac stocks mostly took impetus from Wall St’s positive lead after risk appetite was spurred as yields and oil prices declined from recent peaks but with some of the gains in the region capped heading into quarter-end and amid several holiday closures. ASX 200 (+0.3%) was kept afloat by outperformance in the mining and materials sectors but with trade constricted amid quasi-holiday conditions with Victoria state on a public holiday which affects Australia’s second most populous city of Melbourne. Nikkei 225 (Unch.) failed to sustain early gains and pulled back from resistance around the 32,000 level despite several encouraging data releases including Retail Sales and Industrial Production, as well as softening Tokyo inflation. Hang Seng (+2.5%) outperformed as property and tech surged after the recent easing of yields and following further supportive measures by Chinese authorities, while the index was unfazed by the absence of mainland participants and Stock Connect flows due to the Mid-Autumn Festival and next week’s National Day holidays.


• US equity futures (ES +0.4%, NQ +0.6%, RTY +0.4%) are trading firmer as they continue to advance on yesterday's gains, owing to a generally more positive risk tone and as yields see some downside over the past couple of sessions. Today's agenda has an inflation focus, with Eurozone flash inflation metrics due in the morning before US PCE inflation data due in the afternoon (the US data is expected to be mixed, with the annual headline rising, but the annual core rate paring back). Traders will also be monitoring US fiscal headlines; a Senate bill to avert a government shutdown garnered enough votes to advance, and the US House passed its State Department, Defense and Homeland appropriations bills; early reports today suggest House Republicans have also released a stopgap bill to fund the US government, Bloomberg reported. In terms of possible ramifications, should the shutdown occur, the markets may miss out on next week's NFP report. This may bring particular attention to alternative data releases such as ISM Manufacturing and services, which will still be released as expected. Away from data, Fed’s Williams is set to speak on monetary policy at 17:45 BST / 12:45 ET, with earnings from Carnival Corp also due. In terms of stock specifics, Nike (+8.2%) shares are flying in pre-market trade after beating on its results and after reiterating its FY24 guidance. This was noted as a positive for the Co., considering shares are down 24.5% YTD. In terms of commentary, the Co. emphasised that inventory levels are healthy and noted that the supply chain conditions are normalising.


• Equity sectors in Europe are mostly firmer with Consumer Products & Services top of the leaderboard as luxury names benefit from a broker upgrade for Brunello Cucinelli (+8.3%) as Goldman Sachs which has subsequently provided support for peers such as LVMH (+3.3%), Richemont (+2.9%), Hermes (+2.2%) and Kering (+2.1%). Other gainers include Tech, Real Estate and Basic Resources, whilst Insurance and Energy are the only sectors in the red with the former dragged lower by reinsurance names and the latter led lower by yesterday’s declines in crude prices. Sports retailers in Europe are a notable pocket of strength for the region thanks to Nike (+7.8% pre-market) who delivered solid earnings after-hours in the US yesterday; Adidas (+6.3%), Puma (+5.9%) and JD Sports (+5.8%). Commerzbank (+9.6%) is the best-performing stock in the Stoxx 600 after announcing it intends to return EUR 3bln to shareholders as dividends and share buybacks between 2022-2024. Finally, Aston Martin (+11%) shares are soaring after news that the Yew Tree Consortium increased its ownership in the Co. by 3.27% and now holds 26.23% of shares.

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29 Sep 2023 - 09:24- Fixed IncomeData- Source: Newsquawk