EUROPEAN EQUITY UPDATE: Stoxx 600 set to close the week out with gains in excess of 3%

Analysis details (09:25)

• European equities (Stoxx 600 unch.) trade with little in the way of firm direction during today’s session but are ultimately on track to close the week with notable gains; Stoxx 600 is up over 3% WTD. In terms of macro developments for the region, things have been on the quiet side and therefore it appears that impetus has been gained from elsewhere, mainly the US and the slew of disinflationary impulses which have been recorded this week.


• Asia-Pac stocks traded mostly higher after the positive lead from Wall Street. ASX 200 (+0.8%) was firmer with gains in the index led by the tech sector, while the announcement that RBA Deputy Governor Bullock will take over from Governor Lowe in September had little effect on markets. Nikkei 225 (-0.1%) swung between gains and losses with headwinds from JPY strength and speculation that the BoJ could raise its inflation forecast above the 2% target at its meeting this month, which could pave the way for policy normalisation. Hang Seng (+0.2%) and Shanghai Comp. (Unch.) were contained despite the renewed support pledges by the PBoC to keep credit growth appropriate, as well as step up counter-cyclical adjustments and support for key sectors.


• US equity futures are slightly lower but on course to book solid gains this week, amid a mix of cooling inflation dynamics combined with gauges which still suggest a solid labour market, giving rise to 'Goldilocks' framing of the US economy. Many desks are now also becoming more bullish and are refocussing on the potential for US stocks to climb to all-time highs once again. Today, the narrative will be coloured by the health of the financial sector, with earnings due from JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC), BlackRock (BLK) and State Street (STT). JPMorgan's analysts, previewing bank earnings, say investors will be broadly focussing on five key themes: 1) Trends in investment banking. 2) Credit quality. 3) Trends in deposits. 4) How net interest margins are evolving. 5) Regulatory challenges. On the macro front, US import and export price data for June and the prelim. University of Michigan sentiment survey for July will be eyed for further incremental updates on the inflation narrative. On the speaker’s slate, Fed’s Goolsbee will be doing the media rounds in pre-market trade.


• Equity sectors in Europe are a mixed bag. Health Care and Tech are names top of the leaderboard with the former underpinned by a slew of broker moves by HSBC in some names (Novo Nordisk +1.7%, Sanofi +1.2%, Merck +0.8%), whilst the latter tracks a similar performance stateside yesterday. To the downside, Basic Resource and Telecom names lag peers with the former hampered by price action in underlying commodity prices. Of note for the latter, today has seen negative earnings releases from Nokia (-8.6%) and Ericsson (-7.3%) who are two of the worst performers in the Stoxx 600. In terms of other updates, Burberry (+0.3%) reported marginally softer than expected Q1 sales figures but maintained current year guidance. ITV (-0.5%) confirmed it is no longer actively exploring a possible acquisition of All3Media. Finally, troubled Swedish landlord SBB is softer post-H1 earnings, alongside which it stated that their situation “is not alarming” and does not need government support.

14 Jul 2023 - 09:25- Research Sheet- Source: Newsquawk