EUROPEAN EQUITY UPDATE: Turnaround in stocks after a positive APAC lead

Analysis details (09:25)

Major bourses in Europe kicked off the session with mild losses across the board but the downside faded within the first hour of trade – with sentiment propped up following a mostly positive APAC handover whilst some positivity also coincided with reports via Bloomberg that Beijing City is set to improve COVID rules for people entering the city. This update follows the Chinese presser on Saturday whereby China’s health commission spokesman said they will not waver in preventing a COVID rebound and in the dynamic clearing of cases as soon as they emerge; note, the commission did not make adjustments to anti-COVID protocols. Market participants will eye key risk events this week including the US midterm elections and Chinese/US CPI. US equity futures have also moved into the green (ES +0.2%, NQ +0.3%, RTY +0.3%) after posting mild losses overnight and in the run-up to the European cash open. Analysts at JPM suggest that stock markets could see support from a potential peaking out in bond yields coupled with “very downbeat” sentiment and position alongside good seasonal factors. Strategists at JPM remain neutral on Japan and the US, whilst among sectors, JPM is underweight traditional defensives and overweight defensive value. Back in Europe, major bourses are mostly firmer (Euro Stoxx 50 +0.6%, Stoxx 600 +0.4%) whilst the UK’s FTSE 100 (-0.1%) is the relative laggard as energy giants reside in the red whilst GSK (-3%) sits at the bottom of the index after failing to meet the primary endpoint in one of its Phase III trials. Sectors are now mostly firmer and have experienced a turnaround since the cash open – with defensives now largely towards the bottom of the bunch. The standout sectoral outperformer is Travel & Leisure as Flutter Entertainment (+4.3%) and Ryanair (+3.1%) prop up the sector – the former after Fox won the rights to buy Flutter’s 18.6% stake in FanDuel, and the latter post-earnings. The Tech sector meanwhile sees its gains capped after Apple (-1.1% pre-market) trimmed its new iPhone output forecast by 3mln units as demand cools, according to Bloomberg.

07 Nov 2022 - 09:25- EquitiesResearch Sheet- Source: Newsquawk