UBS highlights banks, consumer durables stocks on 'buy' list

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STOXX 600 up 0.6%

Financials top positive weight

U.S. Q4 GDP data in focus

Wall Street futures inch higher

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Stock-pickers have their work cut out in 2023, grappling with big themes like diverging central banks trajectories, China's reopening and a potential economic slowdown.

UBS haven't shied away from the task, coming up with a list of high conviction buy and sell stocks. Among other metrics, they measured a stock's correlation to EURUSD as well as its correlation to China PMI.

Banks and consumer durables are highly featured on their conviction 'buy list,' which includes luxury companies Richemont CFR.S and Moncler MONC.MI, Deutsche Bank DBKGn.DE and the UK's Lloyds Banking Group LLOY.L, among others.

"Banks stand to benefit from rising yields whilst Consumer Durables have strong pricing power and should be beneficiaries of China re-opening."

The likes of Dutch semiconductor company ASML ASML.AS and Ryanair RYA.I also feature on the buy list.

Capital Goods, meanwhile, is one of their least preferred sectors, and features heavily in their 'sell' list.

(Lucy Raitano)



Trying to decipher where bond markets are heading in the short term has become somewhat trickier. The European Central Bank's and Federal Reserve's fist meetings of 2023 are approaching and investors may need to wait for their deliberations to have a clearer view.

Nervous markets are seeing wild swings in either direction, leaving 10-year German benchmark yields DE10YT=RR just at the midpoint of a four-month-old range and seemingly undecided on longer term direction. The equivalent U.S. Treasury yield US10YT=RR is also stuck in a four-month range, but at the lower end of it.

Giuseppe Sersale, strategist and fund manager at Anthilia, believes bond markets will remain jittery and any stabilisation may come only after the ECB and Fed decide on policy on Feb 2 and Feb 1, respectively.

"My impression is that bond markets are caught between two contrasting forces," he writes. "On the one hand, a macro picture that, particularly in the U.S., is showing signs of weakness, while in Europe it is more robust with falling gas prices and expectations of a significantly drop in inflation.

"On the other, the looming meetings at the Fed and ECB, both of which are sounding hawkish and proposing more aggressive scenarios than their respective markets are pricing... Hence the nervousness of bonds and the violent and seemingly erratic swings in recent days," he adds.

(Danilo Masoni)



The STOXX 600 .STOXX is up 0.6%, lifted by a stream of better-than-expected earnings.

Banco de Sabadell SABE.MC is the biggest gainer in the index, up 7.9% after beating expectations with its fourth-quarter net profit. STMicroelectronics STM.PA is not far behind, up 7.1% after the chipmaker posted a fourth-quarter sales rise.

Financial services .SXFP are performing the best on a sector basis, rising 1.3% and lifted by UK investment firms 3i III.L and Intermediate Capital Group ICP.LC, both up around 4.7% after posting performance updates.

Food and beverages <.SX3P. are the worst performing sector today, down 0.5%, with premium spirits maker Diageo DGE.L the biggest drag on the STOXX 600. Shares in the maker of Johnnie Walker whisky and Tanqueray gin are down 5% as traders digest a miss on its U.S. net sales.

Shares in Swedish bank SEB SEBa.ST fell, down 3.6% after what Citi analysts call a "low quality beat" in Q4 earnings.

(Lucy Raitano)



Stock futures are heading higher in Europe ahead of the open, with EuroSTOXX50 STXEc1 futures signalling a 0.55% lift, as traders gear up to digest the latest earnings reports from some key European corporates.

FTSE 100 FFIc1 futures contracts are 0.40% higher and German DAX FDXc1 futures are seen rising 0.5%.

Traders expect shares in Sweden's SEB SEBa.ST to lift after the bank reported a forecast-beating rise in fourth-quarter net earnings on Thursday and proposed a larger-than-expected rise in shareholder dividend.

The same goes for Finnish telecoms company Nokia NOKIA.HE, which beat quarterly operating profit expectations and forecast higher 2023 sales and Paris-listed chipmaker STMicroelectronics STM.PA which beat fourth-quarter sales expectations.

Meanwhile, Swedish truck maker AB Volvo VOLVb.ST reported a slightly smaller rise than expected in fourth-quarter core profit.

A positive earnings run would add fuel to the optimism that has coloured the beginning of 2023. But at odds with the positivity, is a recent Reuters poll of economists who said global economic growth is forecast to barely clear 2% this year and that a greater risk was a further downgrade to their view.

(Lucy Raitano)



While the European corporate earnings season still has a way to go, results so far have left investors hopeful that the region may well be able to weather the storm that's combining inflationary pressure and economic slowdown. Things are not as bad as some had feared, with the region's prospects boosted by China's reopening, an unexpectedly mild winter and resilient activity data.

These hopes have lifted the pan-European STOXX 600 index .STOXX, which is up 6.4% for the month and is set for its best January performance since 2015.

Over in Asia, the return of Hong Kong markets helped lift MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS to a fresh seven-month high, with gold hovering at a nine-month high and the dollar wallowing at an eight-month low.

Investors' focus is on next week's set of central bank meetings as the U.S. Federal Reserve, European Central Bank and Bank of England decide on their rate-hike paths. Now that one of the major central banks, the Bank of Canada, has said it will pause interest rate hikes for now, traders are hopeful that the Fed (and to some extent the Bank of England) will be next.

Meanwhile, Thursday's earnings report from LVMH LVMH.PA will underscore just how important China's reopening is likely to be for the luxury industry. It remains to be seen whether revenge shopping from Chinese consumers will provide the fillip the industry has been pining for.

Speaking of earnings, Tesla's TSLA aggressive price cuts paid off, igniting demand for its EVs and helping the carmaker beat Wall Street targets for fourth-quarter revenue and profit.

Key developments that could influence markets on Thursday:

Economic events: Sweden's consumer confidence data for January, U.S. GDP data.

Earnings: LVMH, Nokia, STMicroelectronics, Diageo and Volvo  in Europe; Blackstone, Mastercard, Southwest Airlines, Intel, and Visa among others in United States.

(Ankur Banerjee)


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