EUROPEAN EQUITY UPDATE: Stocks struggle for direction, EZ-PMIs beat forecasts but remain sub-50

Analysis details (09:35)

• European equities (Eurostoxx 50 +0.1%) are struggling for direction after the modest gains seen at the cash open were scaled back. The handover from Asia (n.b. Japan was away from market) was a mostly constructive one following the respectable showing on Wall St. yesterday, albeit, China-related COVID concerns continue to remain at the forefront of the APAC macro narrative as several key cities tightened restrictions and testing requirements. The macro focus for Europe thus far has fallen on the flash prints for the November PMI data, whereby the EZ-wide manufacturing and services prints exceeded expectations but ultimately remained sub-50, leaving the composite at 47.8. The report noted “a further fall in business activity in November adds to the chances of the eurozone economy slipping into recession. So far, the data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just over 0.2%”. Stateside, US futures are hugging the unchanged mark with the ES continuing to hold a footing above the 4k mark. Today’s US data docket sees the release of Durable Goods Orders, weekly jobs data (a day early on account of the Thanksgiving Holiday tomorrow), flash November PMIs and the minutes from the FOMC’s November meeting. UBS Global Wealth Managements doubts that the increase in US stocks since the October low marks the commencement of a “new market regime” on account of it being too early to expect the Fed to provide a policy pivot. Accordingly, UBS favours defensives and value plays. Elsewhere and looking ahead to 2023, BofA recommends avoiding risk assets in H1 before adopting a more bullish stance in H2 as US inflation and FFR peaks; holds a 2023 year-end target at 4000 (roughly flat vs. current levels). Sectors in Europe are a mixed bag with Energy and Basic Resource names extending the recovery made during yesterday’s session. To the downside, Auto names lag peers with Volkswagen (-1.4%) an underperformer within the sector after the IG Metall Union announced that the Co.’s workers will receive a 5.3% wage hike from June 2023 and an additional 3.3% in May 2024, alongside a EUR 3k one-off payment to offset inflation. Credit Suisse (-4.5%) is the worst performing stock in the Stoxx 600 after stating that it expects to report a substantial loss before tax in Q4 2022 of up to CHF 1.5bln. Glencore (+4.5%) is top of the FTSE 100 and Stoxx 600 after Metal Acquisition Corp agreed to amended terms to purchase its Cobar copper mine in Australia, in a deal valued at USD 1.1bln.

23 Nov 2022 - 09:35- Research Sheet- Source: Newsquawk