EUROPEAN EQUITY UPDATE: Stocks struggle for direction in catalyst-light trade

Analysis details (09:35)

• European equities (Eurostoxx 50 unch.) once again trade with little in the way of firm direction at this stage of the session with broader macro updates on the light side for the region asides from more soft data from Germany as industrial output contracted 1.4% in September vs. Exp. -0.1%. It is a light calendar for the week and therefore gyrations in the fixed income space may dictate the state of play for broader sentiment. Equity sectors in Europe are a mixed bag with outperformance in the Retail sector potentially as a read across from AB Foods (+6.9%) earnings which saw the Co. report better-than-expected sales figures for its Primark division. Elsewhere, UBS (+3.1%) is helping support the financial services sector with some desks citing the Co.’s strong underlying profits as opposed to the overall net loss associated with incorporating Credit Suisse. Telefonica Deutschland (+37.9%) shares are soaring as its results were overshadowed by news that Telefonica is looking to acquire the 28% of the Co. that it doesn’t currently own. CNH Industrial (+3.6%) shares are cheering news of the Co.’s newly-announced USD 1bln buyback ahead of its Italian delisting in Jan 2024 and earnings later in the session. Daimler Truck (-3.5%) shares are on the backfoot after Q3 results saw the Co. report a miss on revenues and adj. EBIT.


• Elsewhere, Citi notes that its equity market positioning model highlights a rebound for markets as short covering led weekly futures positioning activity. That said, a backdrop of narrowing profit margins means that S&P futures positioning remains “moderately bearish”. Positive upticks were also observed in Europe but to a lesser degree; Eurostoxx remains extended short, whilst the FTSE is still bullish and near unchanged on the week.


• APAC stocks were softer across the board following the prior day’s gains and the choppy/mixed lead from Wall Street. South Korea’s KOSPI (-2.3%) was the notable underperformer after surging yesterday on the back of the stock short-selling ban. ASX 200 (-0.3%) saw its downside led by Financials and Real Estate with the RBA matching expectations and hiking rates by 25bps. Hang Seng (-1.7%) and Shanghai Comp (Unch.) opened lower amid the broader market mood with news flow also on the lighter side aside from the Chinese trade data, which ultimately was unable to stem a significant market reaction.


• US equity futures (ES -0.3%, NQ -0.2%, RTY -0.2%) are trading on the back foot, with sentiment generally sour following yesterday’s Treasury sell-off, which almost entirely pared most of the post-NFP upside. The docket for today is thin by way of data, with traders looking out for US International Trade, Manheim Index and IBD/TIPP releases. Though much of the focus today will largely be on the Fed, with a total of six members due to speak, including; Goolsbee, Barr, Schmid, Waller, Williams & Logan. On the earnings front, there will be notable releases from Uber, eBay and Occidental Petroleum Corp. In terms of stock specifics, Baidu (9888 HK) placed an AI chip order with Huawei, via Reuters citing sources. The Co. aims to move away from Nvidia (NVDA, -0.7%), in anticipation of new rules imposed by the US on the exports of chips to China. JPM's Global Markets Strategist Marko Kolanovic notes that falling bond yields and the dovish central bank meetings are being interpreted by equity markets as a positive in the near term, but JPM believes "that equities will soon revert back to an unattractive risk-reward as the Fed is set to remain higher for longer, valuations are rich, earnings expectations remain too optimistic, pricing power is waning, profit margins are at risk and the slowdown in topline growth is set to continue."

07 Nov 2023 - 09:35- EquitiesEU Research- Source: Newswires