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STOXX trades roughly unchanged, set for 6th weekly gain
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Homebuilders temper FTSE 100
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U.S. shortened-trading day for Black Friday
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EU BANKS: ACTIVE BUYBACKS A BOON AS MARKET DRIES UP (1313 GMT)
As a seasonal slowdown in trading becomes palpable across markets, Credit Suisse analysts are casting an eye over some European banks with active buyback programmes - some of which they see as benefitting from less liquid markets.
Many banks, such as those in the UK, have already wrapped up their 2022 buyback programmes, but ten large ones are still completing theirs, the analysts wrote.
"The biggest with defined end-dates outstanding as a percentage of market cap include ING, SAN, NDA and SG while those which represent the greatest share of average VWAP are SAN, ING, CABK and NDA," they write.
The analysts slap an outperform rating on all of those except from Nordea, which has a neutral rating.
Three-quarters of large cap EU banks are expected to repurchase additional shares in 2023, increasing the sector's dividend yield by 3.1% to around 10% - compared with 4% for the rest of the market, the analysts write.
"Banks with a consensus total return yield above 10% are UCG, NWG, BNP, ING, ABN, BBVA, LLOY, UBS and SAN" say the analysts, all of which they rate as outperform apart from the neutrally-rated ABN and BBVA.
There has been some regulatory-related investor concern around capital return from banks, but ING's delayed announcement with Q3 results of a larger-than-expected additional buyback in 4Q22 provided some reassurance that most lenders will be able to follow through on commitments, according to the analysts.
"The main focus of regulators seems to be multiyear absolute commitments, rather than payout ratios."
WHAT'S BEST IN 2023: BONDS OR EQUITIES? (1201 GMT)
Inflation is critical for financial markets as the Federal Reserve’s fights surging in consumer prices dictated the market trends: bonds, equities, and currencies.
Stephen Jen, co-CIO at Eurizon, provides some insight about what asset class will win out in 2023.
“Global equities most likely have also bottomed and will recover in the coming quarters, but I think the Sharpe ratio will be lower for equities than for bonds,” he says.
The Sharpe ratio is a mathematical expression that compares an asset's return with its risk, providing a measure of investment risk-adjusted performance.
“I believe the dollar has peaked and could weaken steadily for the next year or so as U.S. inflation abates,” he adds. “Bond yields in the world should fall, except in China.”
“I believe the trends will be steady and sustained, mainly because I was never persuaded by the view that structural inflation in the world will be permanently and significantly higher than before 2021,” he says.
PARTY LIKE IT'S 1999 (1104 GMT)
With just five weeks to go to the end of the year, the STOXX 600 is looking at a gain of 14% so far in the fourth quarter.
Typically, Q4 is the strongest in the year for the index. According to Refinitiv data, in the last 30 years, it's gained 5.1% in the last three months of the year, compared with the third quarter - its historically weakest - when it's lost 0.9% on average since 1992.
This year's Q4 gain of 13.5% would mark the best performance in the final three months of the year for the STOXX since Q4 1999.
ANOTHER BRICK IN THE WALL (0909 GMT)
Europe has got off to a moderately softer start. The STOXX is trading 0.2% lower on the day, as modest gains in energy stocks like Shell and TotalEnergies offset losses in luxury retailers - LVMH and Richemont are the largest drag on the index on a weighted basis.
In the UK, homebuilders Taylor Wimpey and Persimmon are among the biggest negative weights on the FTSE 100 , which is still up 0.2% on the day. Rightmove said earlier that high mortgage rates are increasingly pushing first-time buyers into the rental market.
EUROPE HEADS FOR SIXTH WEEK OF GAINS (0728 GMT)
European stocks are heading for a bit of a mixed start today. Futures on the Stoxx 50 are flat so far, while those on the FTSE 100 are down 0.1%. DAX futures are nudging higher, up 0.1%.
That said, the STOXX 600 is heading for its sixth straight week of gains - something it has not managed since October last year.
With the U.S. having been closed the day before for Thanksgiving, it's been a thin week, volume-wise. But an expectation is growing that inflation may have peaked and it may be time to start pricing in a peak for interest rates.
"Unsurprisingly, it’s been a pretty subdued 24 hours for markets, with much lower volumes than usual due to the US holiday. Nevertheless, there were fresh signs elsewhere that risk appetite was continuing to grow among investors, aided by some positive data releases and further signals that central banks might not end up hiking as aggressively as feared," Deutsche Bank's Jim Reid says.
