Bulls wrestle for control

Tale of the tape

European stocks rallied last week with a strong finish on Friday. US stock markets rose Friday but edged lower over the week, with the Vix also lower. After the Fed raised rates and sounded hawkish, labour market data on Friday painted a mixed picture. Bulls were keen to look at the 3.7% unemployment rate rather than the 261k jobs added for the month. China reopening hopes helped to lift sentiment last week also – a factor to consider after the country said it’s not reviewing its zero covid policy – that news over the weekend saw the dollar gap higher this morning in Asian trade and took the shine off European indices in early trade on Monday, though early losses were swiftly trimmed and we had some green on the boards by 08:30. European stock indices were broadly higher within the first hour of trade and the early gains for the dollar quickly erased as the European session got underway. The bulls are wrestling for control and winning but still a bear market rally.

Reopening in China?

Beijing quashed rumours it will end zero covid rules early next year. But it is still something to keep an eye on; GS were out with a note over the weekend saying Chinese equities could jump 20% on expected loosening of covid rules in Q1 2023. Data this morning showed Chinese exports registered their first decline since May 2020. 

Big tech

Apple says it has temporarily reduced iPhone 14 production due to restrictions in China leaving its Zhengzhou factory operating at “significantly reduced capacity”. Meta is reported to begin mass layoffs this week...where Elon leads the rest will follow? Apparently, Musk let go some people by mistake and is recalling many who were fired by email last week. 

 Ryanair raises outlook

Elsewhere, Ryanair raised its full-year passenger target as it reports strong demand. Full-year profits seen in excess of €1bn. The airline reported a half-year after-tax profit of €1.37bn due to favourable demand and pricing dynamics that saw record Q2 traffic and summer fares which were 14% up on pre-Covid pricing. Shares rose 3% and the read across from Ryanair is helping to lift travel & leisure this morning, with IAG and EasyJet also +1.5%. 

Coming up today

ECB President Christine Lagarde speaks, whilst Fed speakers include Susan Collins, Loretta Mester and Tom Barkin. Eurogroup finance ministers meet, whilst earnings come from  Palantir Technologies (PTLR), Viatris (VTRS) and Activision Blizzard (ATVI).