EUROPEAN EQUITY UPDATE: Tentative tone across stocks as bourses move between modest gains and losses in horizontal trade

Analysis details (10:10)

Equity bourses in Europe are now mixed following a predominantly softer cash open – but the breadth of the market is narrow with gains and losses across the region rather modest. Sentiment remains somewhat tentative after a downbeat lead from Wall Street and a choppy but ultimately negative handover from Asia-Pac trade. US equity futures are flat and trading on either side of the break-even mark with no real stand-out performers. In the pre-market, Bloomberg reported that key Apple (-0.9% pre-market) supplier expects iPhone orders to drop on weak demand. Looking ahead to next year, analysts at BofA highlight two risks the desk sees for next year: 1) being naked equities “near-term downside risk amid a recession, earnings cuts and QT / persistent inflation driving the S&P 500 to as low as 3000, then a snap- back as uncertainty, rates volatility and earnings revisions improve”, and 2) being invested in the wrong stocks “2022 emphasized the risk of being invested in the wrong stocks. 62% of stocks are ahead of the S&P 500, the best market breadth since the TechBubble. Just by simply owning the equal-weighted S&P 500, one could have outperformed the cap-weighted S&P 500 by 7ppt YTD.” Sectors are mostly lower with no clear bias amid the tentative mood, whilst healthcare stands as the marked outperformer amid reports US federal judge boots out suits claims against GSK Plc (+9.0%), Sanofi SA (+5.7%), Pfizer (Unch pre-market) that heartburn drug Zantac caused cancer, though does not directly affect thousands of similar cases in US state courts, with GSK’s spinoff Haleon (+4.0%) feeling tailwinds. Back to sectors, the greatest losses are seen across the Energy and Basic Resources sectors amid recent price action in underlying commodities. In communications, Vodafone (-2.5%) and Three UK are battling to overcome regulatory and political hurdles threatening a deal to create UK's largest mobile operator, according to Bloomberg. In financials, Credit Suisse (-1.2%) is trying to entice rich clients with higher-yield notes and bonus deposit rates in a bid to quickly recoup recent withdrawals; elsewhere, Co. has cut a deal to use the First Boston trademark for its spun-out investment bank. In cyclicals, Clas Ohlson's (-2.1%) Q2 EBIT missed estimates, with the Co. looking to deliver SEK 110mln of cost savings in 2023-24.

07 Dec 2022 - 10:10- EquitiesResearch Sheet- Source: Newsquawk