EUROPEAN EQUITY UPDATE: Stocks struggle for direction after recent gains

Analysis details (09:34)

• European equities (Eurostoxx 50 +0.1%) trade with little in the way of firm direction as macro impulses for the region remain on the light side and as such discrepancies between individual indices are driven more by stock-specific updates. Equity sectors in Europe have a negative tilt with Energy the standout laggard amid downside in underlying crude price. Luxury names have been dealt a blow by post-earnings losses in Burberry (-9.1%) with the Co. warning it is unlikely to achieve previously issued revenue guidance if weak demand persists; Kering (-1.1%), LVMH (-1.3%) and Hugo Boss (-2.2%) are lower in sympathy. To the upside, Utilities are top of leaderboard with SSE (+2.2%) a notable outperformer thanks to a broker upgrade at BNP Paribas. The Industrial Goods & Services sector has been boosted by post-earnings gains in Siemens (+6.1%) which saw the Co. announce a strong order book, dividend increase and share buyback of up to EUR 6bln for up to five years. On a less encouraging footing, HelloFresh (-19.6%) is by far the worst performer in the Stoxx 600 after lowering the top end of its FY23 revenue guidance and its FY23 adj. EBITDA outlook. Finally, Bloomberg reports that Sanofi (flat) is working with advisers on a potential spin-off of its consumer health division which could be valued at in excess of USD 20bln.


• Asia-Pac stocks were mostly negative after the choppy performance in the US and as the recent data-driven momentum lost steam. ASX 200 (-0.7%) traded lower with the energy and mining-related sectors pressured by a deterioration in the commodities complex and with stronger-than-expected employment data doing little to spur risk appetite. Nikkei 225 (-0.4%) failed to sustain its early gains despite better-than-expected exports and machinery orders as investors took the opportunity to book profits. Hang Seng (-1.4%) and Shanghai Comp. (-0.7%) weakened amid mixed tech earnings ahead of Alibaba’s results and with participants digesting the rhetoric from the Biden-Xi meeting which was said to be constructive and productive. However, reports also noted that Biden said Xi was a dictator and raised concerns with Xi about China's human rights abuses in Xinjiang, Tibet and Hong Kong, as well as emphasised the US would take action to prevent its technology from being used to undermine its security.


• US equity futures (ES -0.1%, NQ -0.2%, RTY +0.2%) are mixed with modest outperformance in the Russell, building on yesterday’s gains. The docket for today is fairly thin on the data front, with US IJC and Philly Fed Business Index due. However, there are several Fed speakers to keep the markets busy, including; Williams, Waller, Mester & Barr, with the latter two due to speak twice. There are also notable earnings releases today, with Alibaba (BABA), Macy’s (M), Walmart (WMT) & Applied Materials (AMAT) to report throughout the day. Walmart (+0.4%) will be of particular interest following Target’s (TGT) blockbuster earnings yesterday, which saw its shares surge 15% on the day. In terms of stock specifics, Cisco (CSCO, -11.4%) is slumping in the pre-market after the Co. cut its FY guidance, amid slowing orders due to high customers. As for sectoral read-across, keep an eye out on US-listed Luxury names (e.g. Ralph Lauren), following demand growth warnings at Burberry.

16 Nov 2023 - 09:34- Research Sheet- Source: Newsquawk