EUROPEAN EQUITY UPDATE: Stocks venture higher in early European trade

Analysis details (09:35)

• European equities (Eurostoxx 50 +0.5%) trade firmer in what has been a session void of incremental macro news. The main data highlight for the session has come via German trade data, which showed a larger-than-expected surplus, however, exports deteriorated at a faster-than-expected clip of -1.2% on a M/M basis. Following the data, ING noted, “With the drop in retail sales and today’s disappointing export data, the risk of the German economy sliding back into recession in the third quarter remains high”. Bigger picture though, it remains the case that it’s likely that events in the fixed income space will be the main driving force for equities. Yesterday saw some respite in the European rates space as the German 10yr yield failed to hold above 3%. However, it’s hard to call a peak in rates at this stage given the velocity of price action over the past few weeks. The next inflection point will likely be tomorrow’s widely-anticipated NFP print which will be front of mind for traders given this week’s hawkish JOLTs release.


• Asia-Pac stocks traded higher as risk assets found reprieve after yields eased back from recent peaks following weak US ADP jobs data and a slump in oil prices. ASX 200 (+0.5%) was positive following mostly improved trade data and with the gains led by yield-sensitive sectors including real estate and tech. Nikkei 225 (+1.7%) outperformed as bargain buying kicked in with the index set to snap a five-day losing streak. KOSPI (Unch.) saw initial gains though was capped following the firmer-than-expected CPI data which the BoK expects to stabilise into year-end. Hang Seng (+0.2%) initially lagged amid very light news flow and the continued absence of mainland participants, while the latest Hong Kong PMI data printed at a deeper-than-previous contraction. However, the momentum eventually picked up in Hong Kong amid the brightened mood across regional counterparts and after Sunac China’s offshore debt restructuring plans received court approval.


• US equity futures (ES -0.2%, NQ -0.2%, RTY -0.2%) are trading on the back foot, with sentiment turning sour since the European cash open, coinciding with a slight rise in yields. Recapping yesterday's data, the ADP print offered some optimism for stocks, where the figure was characterised as softer than expected, helping to push back against the “higher for longer narrative” ahead of tomorrow's NFP report.  Back to today, the focus will be back on employment data with traders eyeing both Challenger Layoffs and the weekly IJCs, with the recent releases sparking notable moves in the market.  There are also a slew of Fed speakers due, including Mester (Hawk), Kashkari (Hawk), Barkin (Hawk), Daly (Neutral) and Barr (Neutral). In terms of stock specifics, the UK’s Ofcom announced it had identified features that could limit competition in the cloud market and if left unchecked, competition could deteriorate in a critical digit market for the UK economy. This is particularly of note for Amazon (AMZN) and Microsoft (MSFT), which are leading providers in the cloud infrastructure services space.


• Equity sectors in Europe are mostly higher with outperformance in the Travel & Leisure sector as airlines welcome yesterday’s pullback in crude prices. Conversely, to the downside, Energy names lag. On a regional level, RBC upgraded UK equities to market weight from underweight. Whilst in terms of stock-specific updates, Alstom (-33%) is by far the worst performer in the Stoxx 600 after cautioning that due to a ramp-up in production and delays for some orders, FY free cash flow would be negative in the range of EUR 500-750mln. Another standout loser comes in the form of Metro Bank (-23%) amid news that it is seeking to quickly raise GBP 250mln in equity and GBP 350mln in debt to shore up its balance sheet. On a more encouraging footing, Pandora (+8.8%) shares are higher after announcing well-received new financial targets with the same being the case for Italian-listed Prysmian (+4%). Finally, Telecom Italia (-1.4%) shares are lower amid source reporting from Reuters that the Co.’s top investor Vivendi (+0.2%), will tell Italy's Economy minister they remain sceptical about a government-sponsored plan to sell the firm’s grid.

05 Oct 2023 - 09:35- EquitiesData- Source: Newsquawk