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STOXX 600 up 0.2%
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Oil leads gainers
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Eyes on Powell speech
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U.S. stock futures edge up
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THE STOCKS WITH "SIGNIFICANT UPSIDE" - BOFA (1241 GMT)
With expectations of a 20% downside for Europe's STOXX 600 by the second quarter of 2023, followed by a rebound of the same degree into year-end, BofA equity strategists predict a choppy year ahead for European equities.
The first half will be coloured by a market shift from the inflation/rates shocks of 2022 to the recession/credit shocks of the beginning of 2023, they say.
But while the macro environment might be challenging, some specific stocks with "significant upside" stand out for the strategists.
That includes HSBC and NatWest in the financials arena, which the BofA analysts views positively in light of the benefits granted by the rate cycle as well as lower risks on loan books.
In the consumer sectors universe, China's re-opening and pricing power mean they take a positive view of luxury goods. LVMH and Richemont are on their lists, while Heineken is the key pick in beverages.
"In Energy & Utilities, our Oil & Gas analysts still see c.10% upside to consensus 23 EPS for Big Oil and select Shell as a top pick along with gas exploration & production company Energean. RWE is the top pick in Utilities," the BofA strategists write.
They also see opportunities for several stocks within industrials, including Siemens, Spirax-Sarco and AutoStore, and in the aerospace arena - namely Airbus and Safran
In building materials they favour Ashtead and Kingspan, and Deutsche Post within transport.
EUROPE'S EARNINGS SEASON WOULDN'T BE SO ROSY WITHOUT BANKS AND OIL (1130 GMT)
Europe's earning season so far is by no means a bad one, but sectoral differences reveal that the cheerfulness around results is mostly down to financials and energy.
Results today from oil major BP and bank BNP Paribas offer the latest example of how things are going well for those sectors. But elsewhere the picture isn't so rosy.
According to BofA Global Research, fourth-quarter EPS for the STOXX 600 is up by 20% so far but stripping out financials and energy it would be down by 9%.
What's more is that for the season as a whole, the consensus continues to point to an EPS decline of 1%, which would be the first negative quarterly growth since the last quarter of 2020.
Without financials and energy, consensus sees fourth-quarter EPS down by 21%, BofA adds.
CHINA ENDS FIVE WEEK STOCK RALLY, BUT OUTLOOK STILL POSITIVE - UBS (1052 GMT)
The MSCI China index fell 4.9% last week, putting an end to a five-week rally in Chinese stocks.
For UBS's chief investment office, last week's "setback" is just that - and they point to economic data and developments in the past week that underscore their positive outlook on China.
Firstly they point out that business surveys for January and holiday consumption data suggest the recovery has begun, and this stretches to an uptick in retail, accommodation and catering as well as movie box office sales and domestic tourism.
"Encouragingly, the rise in domestic travel did not lead to a spike in COVID infections despite earlier fears," the UBS strategists wrote.
A recovery in cross-border travel in China is another reason for optimism, the UBS strategists say, with outbound and inbound trips to and from China climbing 121% and 127% year-over-year, respectively, during the Lunar New Year holidays.
"We expect the return of mainland travelers to lift the outlook for the Macau gaming, aviation, and securities firms. The resumption of mobility should also boost demand for crude oil and base metals."
Recent signals from the Chinese government pointing to a refocus on economic growth is partly behind the UBS strategists' expectations that the country's GDP will rebound to around 5% this year from 3% in 2022, led by a recovery in consumption.
They see opportunities in Chinese sectors that will directly benefit from the country’s reopening, including pharmaceuticals, medical equipment, consumer, internet, transportation, capital goods, and materials.
"Broader emerging market equities as well as US and European companies highly exposed to Chinese spending, including German equities, should also benefit."
ENERGY UPLIFT FOR THE STOXX (0919 GMT)
Support from energy stocks following BP's record profit and stronger oil prices is giving a small lift to the STOXX 600, offsetting weakness in the tech sector and muted moves elsewhere as traders tread carefully given the uncertainty over the outlook for interest rates.
The pan-European index is last up 0.3%. Oil & gas is the biggest sectoral gainer, up 1.4%, while tech dips slightly, weighed down by double-digit drops in ams-Osram and Nordic Semi after disappointing results.
Banks are again in demand after BNP Paribas lifted its 2025 targets and proposed a $5 bln share buyback, in the latest sign of improving prospects for the rate-sensitive sector. Shares in the euro zone's No.1 lender are last up 1.4%.
Here's your opening snapshot:
EUROPE EYES STEADY START (0739 GMT)
European shares look set to stabilise this morning following Monday's losses with investors awaiting a speech by Fed Chair Jerome Powell later in the day for fresh hints on the monetary policy outlook after rate hike jitters resurfaced.
EuroSTOXX 50 futures are up 0.2% and U.S. contracts are also pointing to a steady start for Wall Street, while in Asia, shares stabilised after steep losses in the past 24 hours.
Meanwhile, the European earnings season is still keeping investors busy. BNP Paribas posted lower-than-expected quarterly profits as a jump of its cost of risk and higher operating expenses offset a boom in its trading sales.
The euro zone's biggest lender however, raised its 2025 targets and announced a 5 billion-euro share buyback.
UK oil major BP reported a record profit of $28 billion in 2022 and as increased its dividend by 10% in a sign of confidence in the market's continued strength.
Downbeat numbers in tech with traders pointing to ams-Osram and Nordic Semiconductor missing revenue forecast and quarterly core profit estimates respectively.
Eyes also on Bayer after Reuters reported that investor Jeff Ubben has contacted fellow shareholders in an apparent attempt to rally support for big changes at the drugs-to-pesticides company.
MARKET TO CHATGPT: WHAT'S POWELL GOTTA SAY? (0656 GMT)
Investors are just about coming to terms with the eye-popping payrolls number from Friday, but with Fed Chair Jerome Powell due to speak later in the day, the market will ponder which Powell will turn up (the hawk or the dove). Perhaps ChatGPT has the answer.
Google owner Alphabet unveiled a rival to super popular ChatGPT, saying it will launch a chatbot service named 'Bard'. And so the battle for generative AI, technology that can create prose or other content on command and free up white-collar workers' time, heats up, with Microsoft planning its own AI reveal for Tuesday.
The meteoric rise of ChatGPT, a chatbot from Microsoft-backed OpenAI, has also helped attract retail investors in other smaller firms as artificial intelligence becomes the latest buzzword on Wall Street. (More than 20 years after AI the movie was released)
The main event in Asia was Australia's central bank raising its cash rate by 25 basis points to a decade-high of 3.35% and reiterating that further increases would be needed to fight inflation. The Aussie dollar spiked higher, while short term bonds tumbled.
Asian shares held their ground while the rally in the U.S. dollar took a breather on Tuesday.
Meanwhile, a deadly earthquake killed more than 3,700 people across a swathe of Turkey and northwest Syria, sending Turkey's lira to a record low.
Before Powell takes centre stage and hogs the limelight, Bank of England's Huw Pill is also due to speak and his comments on monetary policy will likely move markets.
Key developments that could influence markets on Tuesday:
Economic events: U.K. Halifax house prices for January, Swiss unemployment data
Speakers: Bank of England's Huw Pill, ECB's Peter Kazimir and Klaas Knot and Fed Chair Powell
Earnings: BNP Paribas SA Q4 results
