EUROPEAN EQUITY UPDATE: Stocks struggle to recover lost ground

Analysis details (09:25)

• European equities (Eurostoxx 50 +0.2%) sit in marginal positive territory with the attempt to recoup yesterday’s notable losses relatively limited thus far. From a macro perspective, as was the case yesterday, things are on the quiet side with markets very much in “looking ahead” mode to the slew of central bank activity on the docket. Previews of upcoming announcements can be found here. It is worth noting that the recent price action in the energy space could weigh heavy on central bankers’ minds with Brent crude breaching USD 95/bbl for the first time since November. The moves are unlikely to have much bearing on immediate policy decisions this week, however, it will likely reinforce the hawkish messaging for such announcements as central bankers attempt to keep inflation expectations anchored.


• Asia-Pac stocks were mostly lower following the flat performance stateside amid a lack of catalysts and with risk appetite sapped as markets brace for the approaching central bank storm. ASX 200 (-0.4%) was pressured as weakness in real estate and financials led the declines from early on, while the RBA minutes from the September meeting provided very little in the way of new information. Nikkei 225 (-0.8%%) underperformed as recent losses in the region caught up to the index on return from the holiday closure and with sentiment also dampened with participants second-guessing if BoJ Governor Ueda will lay the groundwork this week for a future exit. Hang Seng (+0.1%) and Shanghai Comp. (Flat) were choppy owing to the pressure in tech and mixed fortunes among the property stocks but with downside stemmed following further US-China talks and the PBoC’s continued liquidity efforts.


• US equity futures (ES +0.1%, NQ +0.1%, RTY +0.1%) are trading marginally firmer, with markets struggling for direction amid another catalyst-thin day, and ahead of a busy week of Central Bank announcements including the Fed tomorrow. Traders today will keep an eye out for a US Building Permits print, though much of the focus will be across the border, on Canadian CPI. The headline figure is expected to tick up to 3.8% (prev. 3.3%), largely attributed to higher gasoline prices. ING notes that the BoC left the door open for more hikes if needed, and any upside surprises to the inflation metric will put a hike back on the table. Back to equities, the main story over the past few days has been on the labour negotiations between automakers and unions. The UAW has threatened further industrial action if a deal cannot be struck by the end of Friday, while the Unifor union in Canada has extended talks with Ford amid some signs of progress.


• Citi strategist Montagu notes that investors are positioning for more losses in the tech-heavy Nasdaq 100 Index, with the index attracting bearish flows last week. That suggests “few investors are comfortable taking a bullish view on the possibility of a near-term reversal for the growth/tech-related index”, which was initially led by optimism surrounding AI. This is seemingly the trend analysts have been edging towards, with Morgan Stanley strategist Wilson saying yesterday, that the debate is now if mega-cap growth stocks will continue to lead the market, or whether there will be a shift to small/mid-cap stocks. Wilson’s recommended play is to hold a combination of defending growth stocks as well as traditional defensive sectors, such as Healthcare and Consumer Staples.


• Equity sectors in Europe have a slightly positive bias with Autos and Parts top of the leaderboard with Volkswagen (+2.5%) a notable gainer within the group thanks to a broker upgrade at Jefferies. Elsewhere, Real Estate names are also on the front foot, whilst Retail names lag to the downside amid losses in Kingfisher (-5.9%) after H1 results were accompanied by a downgraded to FY23/24 PBT guidance. In terms of individual movers, Tui (+5.8%) is one of the best performing stocks in the Stoxx 600 after confirming expectations for a strong summer 2023 with bookings in the final month of the season, ahead of summer 2022. Ocado (+3.2%) shares are also on the front foot following its latest trading update in which it stated an improvement in performance for its JV with M&S (+1.8%) as well as noting positive real momentum heading into Q4. Finally, reporting via Reuters on UBS has highlighted that S. Korea, India, Ireland and Saudi Arabia have been slow in providing approval re. the Credit Suisse takeover. Uncertainties in securing regulatory approval could result in winding down business and asset sales.

19 Sep 2023 - 09:25- Fixed IncomeEU Research- Source: Newsquawk