EUROPEAN EQUITY UPDATE: Stocks struggle for direction as traders keep their powder dry ahead of next week’s risk-filled bonanza

Analysis details (10:05)

Equities in Europe trade with no firm direction in what has been a quiet morning session thus far in holiday-thinned volumes, with little follow-through experienced from the gains in APAC alongside the modest upside seen on Wall Street yesterday. Friday's early gains have come as APAC stocks took impetus from gains on Wall St, while China CPI data fell to the lowest in eight months and producer prices remained at a 23-month low; Capital Economics said that the shift away from zero-COVID could put some upward pressure on prices going forward, but China seems unlikely to experience the surge in inflation seen in other countries when they opened up and it doubts that inflation will be a policy constraint. US equity futures are similarly trading sideways with mild losses seen across the main contracts at the time of writing, with participants likely keeping powder dry ahead of next week’s US CPI and a raft of major central bank updates including the FOMC, BoE, ECB and SNB. The Bank of America weekly flow show (for the week to Wednesday) suggested global stock funds saw outflows of USD 5.7bln, the US saw the third week of outflows of USD 2.9bln, Europe had a 43rd week of outflows at USD 0.3bln, Japan had 2nd week of outflows at USD 0.2bln, EM saw outflows resume at USD 0.8bln. By sector, Large Caps saw USD 1.9bln of outflows, Growth saw USD 1.7bln of outflows, Value saw USD 0.4bln of inflows, and Small Caps also saw USD 0.4bln of inflows. European equities are currently mixed with the breadth of the market narrow (Euro Stoxx 50 +0.1%; Stoxx 600 +0.2%). Sectors are mostly firmer with no overall bias and again with a narrow market breadth. Construction, Media, Travel & Leisure, and Tech reside as the current winners while Telecoms, Real Estate, Autos, and Energy lag. On Energy, JPM’s Kolanovic recommends selling energy stocks as share prices between energy firms and oil prices diverge. “This is a tactical short-term call, and, given that longer term we still believe in the energy supercycle and broad market recovery after a Fed pivot, a significant pullback (20-30%) in energy stocks would present a great entry point,” the strategist noted. In terms of induvial movers. Credit Suisse (+2.9%) sees a session of gains after raising CHF 2.24bln in the second part of their capital hike, with the bank suggesting this is a key milestone. Anglo America (-1.4%) diverges from other miners after cutting its 2023 copper production guidance, as part of a broader update. AB Foods (-0.3%) trades relatively in line with the market following a mixed trading update. Ipsen (-3.0%) slips after one of their trials did not meet its primary endpoint.

09 Dec 2022 - 10:05- Research Sheet- Source: Newsquawk