EUROPEAN EQUITY UPDATE: Tentative gains for stocks ahead of US PCE metrics

Analysis details (09:25)

European equities (Stoxx 600 +0.3%) are trading a touch above the unchanged mark and on track to close the week out with marginal losses of around 0.3% in what has been a broadly contained week of price action. Overnight, APAC stocks were mixed, trading mostly rangebound after the choppy performance on Wall St; Nikkei outperformed as BoJ Governor nominee Ueda told a lower house hearing that current monetary policy was appropriate, and that Japan still needs more time for inflation to sustainably hit its target. Yesterday's upside on Wall Street has not continued into Friday's pre-market, with the major US equity futures trading with losses (ES -0.3%, NQ -0.6%, RTY -0.2%) and with the E-Mini S&P 500 on course to book a third straight week of losses. That said, the ES is still above the psychological 4,000 mark, and the 50DMA around 3995/6 has generally been respected. It might be fairer to describe the recent action as ‘consolidating’ between 4,000-4,050 after the upside data surprises of late; that range could be tested with the release of today’s US PCE data. The latest Flow Show from BofA revealed that global equity funds saw USD 7bln of outflows in the week to Wednesday. In terms of the regional breakdown, US funds have seen outflows for the past 3 weeks (USD 9.0bln in latest week), Japan has outflows for the past 5 weeks (USD 1.5bln in latest week), Europe has seen outflows resume (with USD 50mln in the week), EMs have now seen inflows for the past 2 weeks (USD 2.1bln this week). Sectors in Europe have a marginal positive tilt which sees Telecoms, Construction and Energy as the outperformers with the latter benefitting from crude prices trying to claw back recent losses. The construction sector has benefitted from post-earnings gains in Saint-Gobain (+5.6%), who account for 8% of the sector, after the Co. reported better than expected top and bottom lines. To the downside, Basic Resource names are the standout underperformers alongside price action in underlying commodity prices. The Autos and Parts sector is being weighed on by post-earnings losses in Valeo (-5.1%) following misses on net and revenue guidance metrics. Elsewhere on the earnings front, BASF (-5.3%) Q4 results has sent its shares to the bottom of the Stoxx 600 with the Co. also announcing 2.6k in job cuts. IAG (-4.4%) is also being weighed on by FY results and agreeing to purchase an 80% stake in Air Europa for EUR 400mln. Finally, one of the more interesting stories doing the rounds today comes via Bloomberg source reporting which suggests Deutsche Bank (+0.4%) was studying potential deal options for Credit Suisse (+0.8%) last fall before its overhaul.

24 Feb 2023 - 09:25- Research Sheet- Source: Newsquawk