EUROPEAN EQUITY UPDATE: Stocks tread water as earnings dominate ahead of FOMC

Analysis details (09:05)

• European equities (Eurostoxx 50 +0.1%) trade with little in the way of firm direction as some of the optimism seen at the cash open was faded. Macro updates for the region following yesterday’s soft data releases remain light and as such, focus has been on another busy morning of corporate updates. Equity sectors in Europe are a mixed bag with Retail names top of the leaderboard thanks to post-earnings gains in Next (+3.0%) which saw the Co. raise FY guidance; note, some of the enthusiasm for the sector is being sapped by losses in Asos (-8.3%) after the Co. reported a near GBP 300mln annual loss. Health Care names are also on a firmer footing with GSK (+1.7%) benefitting from solid Q3 results which saw the Co. boost FY sales and EPS guidance following strong vaccine sales. To the downside, Media names lag peers alongside post-earnings downside in Wolters Kluwer (-3.8%), whilst Utilities are also on the backfoot with Orsted (-20%) rooted to the foot of the Stoxx 600 after the Co. recorded a USD 4bln impairment charge after scrapping US wind projects. Elsewhere, Nexi (+5.7%) is the best performing stock in the Stoxx 600 following reporting in Italian press that the Co. is subject to interest from Silverlake. Finally, Aston Martin (-14.5%) shares are sharply lower after Q3 earnings saw the Co. record a larger-than-expected loss and cut its 2023 volume outlook.


• Asia-Pac stocks traded predominantly higher albeit with upside capped for most indices heading into the FOMC announcement and as the region digested another deluge of data releases including disappointing Chinese Caixin Manufacturing PMI which printed its first contraction in three months. ASX 200 (+0.9%) was positive as outperformance in the mining and real estate sectors picked up the slack from defensives and helped shrug off the surprise contraction in building approvals data. Nikkei 225 (+2.4%) was the biggest gainer amid reports that Japan’s new economic package is to total around JPY 17tln after recent currency weakness in the aftermath of the BoJ’s modest YCC tweak. Hang Seng (-0.1%) and Shanghai Comp. (+0.1%) were choppy as Chinese Caixin Manufacturing PMI data followed suit to the recent deterioration seen in the official release and amid some disappointment after the PBoC’s open market operations resulted in a net daily drain despite prior reports that the central bank is likely to add further liquidity and that money market rates were seen falling from today.


• US Equity futures (ES -0.2%, NQ, -0.2%, RTY -0.2%) are a touch softer as markets await today’s Fed policy announcement. The FOMC is all but certain to leave rates unchanged at 5.25-5.50%, as such focus instead will fall on guidance for the December meeting; note, there are no new SEPs at the upcoming meeting. Money markets, and many Fed officials, are of the opinion that the Fed is done with rate hikes, with the central bank "proceeding carefully" to let cumulative tightening continue to work through as inflation trends lower and the labour market rebalances. However, the latest economic growth resurgence in Q3 is what is keeping tail risk skewed to further hikes in the near term (27% hike probability priced for December currently) as concerns linger of a possible episode of demand-led reflation; a full preview of the event can be found in the research suite of the website. Elsewhere, markets will also have the opportunity to digest October’s ADP release (ahead of NFP on Friday), the Treasury Quarterly Refunding Announcement and ISM Manufacturing data. Today’s pre-market earnings slate includes the likes of DD, CVS, HUM, EL, KHC, YUM, whilst, QCOM ABNB, ABNB, MDLZ, MET, PYPL are due after-hours.

01 Nov 2023 - 09:05- Research Sheet- Source: Newswires