EUROPEAN EQUITY UPDATE: Stocks tilt lower on month-end whilst DAX is cushioned by heavyweight SAP

Analysis details (09:05)

• Stocks in Europe kicked off the session mixed with a positive bias following a similar lead from Asia-Pac and an uninspiring performance on Wall Street, with the major US indices flat after an early tailwind from cooler-than-expected inflation data from Germany and Spain was offset by hawkish comments from Fed's Barkin, while the revision higher in Q3 US GDP had little effect on price action. Overnight, APAC stocks indecisively capped off this month’s notable gains as the Israel-Hamas truce hung in the balance before the announcement of a last-minute one-day extension, while participants also digested a slew of key data releases including disappointing Chinese official PMI figures. China's official manufacturing PMI eased to 49.4 in November (exp. 49.7, prev. 49.5), while the non-manufacturing report slipped to 50.2 (exp. 51.1, prev. 50.6); that left the composite measure at 50.4 (prev. 50.7). HSBC expressed concern over the setback in the services sector, particularly in private consumption demand, observing its weakened momentum in November. There's market anticipation for additional support measures, expecting clarity on potential fiscal stimulus and monetary easing. Without further policy backing, there's a perceived challenge for the economy to achieve a 5% growth organically next year.


• European bourses tilted lower after the cash open (Euro Stoxx 50 -0.2%, Stoxx 600 -0.1%) with a modest negative bias creeping in at the time of writing (vs a slight positive bias at the cash open). DAX (+0.1%) saw early outperformance at the open and remains cushioned as German heavyweight SAP (+0.9%) coat-tails on upbeat earnings from US peer Salesforce (+8.8% after-market). SAP holds around a 10.5% weighting in the DAX 40 and is the largest constituent. Data-wise, retail sales out of Germany surprised to the upside. Key inflation data is on tap from both Europe and the US today. Already, France and Germany have reported lower-than-expected numbers for November, and the Eurozone aggregate data is seen cooling too when it is released later in the morning. Stateside, The US PCE report is also expected to show a cooling of price pressures.


• Sectors in Europe are mixed and more balanced (vs mostly firmer at the cash open), with no overarching theme or bias and with the breadth of the market narrow. Energy leads the charge amid an upside in crude oil prices as traders are watching out for the OPEC+ meetings (Rolling headline and preview for the event available on Newsquawk), which are still scheduled to go ahead; sources have suggested that the group is looking to deepen output cuts next year. Insurance and Financial Services are also towards the top of the bunch but with only modest gains. On the other end of the spectrum, Consumer Products and Services, Retail and Chemicals lag, with K+S (-1.7%) also weighing on the sector following a downgrade at BNP Paribas. Retail is likely pressured following the downbeat Chinese data overnight and the surprise revision lower in French Q3 GDP, with luxury names also subdued (LVMH -1.0%, Kering -1.0%, Burberry -0.6%).


• In terms of individual movers, ABN AMRO (-2.3%) is softer as the Dutch state intends to sell shares, and intends to reduce the stake to around 40% (currently ~49%). Remy Cointreau (+6.8%) fell at the open post-earnings before seeing a notable but gradual rebound in early trade, whilst the CEO saw good depletions in October and November in China, and sales are picking up very fast; still expects sharp destocking in Q3 in China before recovery in Q4. Swiss-listed ABB (+1.2%) is supported after raising its target for long-term comparable revenue growth to +5-7% (prev. guidance +3-5%) and adjusted its Basic EPS at least high single digit (prev. guidance greater than Revenue growth. Elsewhere for the Pharma sectors, the Turkish Competition Authority has launched a probe into 19 pharma firms including AstraZeneca (-0.9%), Bayer (-0.4%), GlaxoSmithKline (+0.4%) and Pfizer (PFE).

30 Nov 2023 - 09:05- Research Sheet- Source: Newsquawk