Beyond Bulls & Bears


Notes from the Trading Desk – Europe

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. As part of Templeton Global Equity Group, the European equity desk is manned by a team of professionals based in Edinburgh, Scotland, whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The digest

Last week was a calmer one for global equities as the dust settled on the sharp Consumer Price-Index (CPI) fuelled moves higher the previous week. Focus was on familiar themes of US inflation given the Producer Price Index (PPI) release in United States, while in Europe, the United Kingdom budget and outlook was a talking point. On the week, the MSCI World Index traded down 0.6%, the STOXX Europe 600 Index was up 0.2%, the S&P 500 Index was down 0.7% and the MSCI Asia Pacific Index was up 0.5%.1

European outlook: less bad?

As we enter the second half of November, it’s notable that German gas reserves are essentially at 100%, further easing concerns about winter heating needs and a severe economic recession.

In addition, sentiment on Europe in the latest Bank of America Fund Managers’ Survey showed some signs of improvement, with a rise in the number of participants showing mild upside to European growth momentum. In addition, while a majority of respondents projected global growth would slow over the coming year, gloominess about Europe over the next 12 months lessened. This is supportive for European equities, particularly highly levered names, and European credit markets continue to improve. However, European equities logged their 40th consecutive week of outflows last week, so not all observers are convinced it will be smooth sailing from here.2

Week in review


European equities recovered into the end of last week to close slightly higher. Stocks had given up some of their gains on Wednesday and Thursday as UK and eurozone CPI prints proved less supportive for equity markets than the US CPI print a week prior. UK inflation for October came in at a 41-year high of 11.1%, well ahead of consensus expectations and a full percentage point higher than 10.1% in September. Energy was the key driver as gas prices rose 36.9% on the month. Food price inflation came in at its highest in 45 years, at 16.2%. Core inflation, which excludes food and energy, was steady at 6.5%.

Meanwhile, eurozone CPI was revised a little lower to 10.6% from the initial reading of 10.7%. However, it is still the highest rate of inflation since the euro was introduced two decades ago. These reports served as a dose of realism for investors midweek, as central banks turned more hawkish once again.

The UK government’s fiscal statement was the focus on Thursday, bringing £30 billion of spending cuts and £25 billion of tax increases. The UK Office of Budget Responsibility (OBR) expects debt-to-gross domestic product (GDP) to rise until 2027, then fall gradually. The OBR also forecast a sharp drop in inflation in 2024 to just 0.6% and then to -0.8% in 2025, which may lead some to rethink their peak rates estimates that might be lower than currently priced, and crucially a shallower and shorter recession than feared. However, the OBR did predict a record two-year fall in disposable incomes and said the pinch on the consumer is still going to be very visible well into 2023.3

In terms of markets, UK domestic stocks rallied back through Friday, whilst gilt yields were higher across the curve. Sterling continued its recovery vs. the dollar last week.

It is interesting the OBR highlighted how significant the impact of the Ukraine war has been, and any positive news therein would provide a tailwind for markets.

There remains a risk tied to further escalation of the war and its impact on energy supplies, inflation and interest rates. As such, UK households could burn through their “lockdown savings” and the impacts on business investment from the war risk, as well as the likelihood of higher corporate taxes, represent market concerns.

In terms of sector performance, utilities outperformed last week amidst lower bond yields. The UK’s fiscal statement also provided clarity for utilities regarding a temporary 45% tax on the electricity generation sector. The UK’s fiscal statement also supported banks—a bank tax surcharge was reduced from 8% to 3%. Meanwhile, real estate stocks lagged on the back of the UK CPI print and the hawkish inferences. In terms of factor moves, cyclicals gave back some of the prior week’s gains, whilst defensive stocks outperformed.

It has been an interesting fourth quarter so far for European stocks, with the Stoxx Europe 600 Index up 11.5% since the start of October. Whilst the rally has some seasonality factors, the majority of the move has been attributed to the belief that we are now getting to the point of peak inflation. The data last week gave investors food for thought around whether the bear market bounce went too far. Some observers have pointed to a short-covering-led bounce. Technical resistance levels have received some attention too, with stocks and broader indices smashing through their respective 50- and 100-day moving averages. However, earnings and economic data continue to send mixed messages for investors and suggest no meaningful shift in bullish or bearish talking points.

United States

US markets paused for breath, with the S&P 500 Index closing slightly lower last week. This is perhaps not too surprising given the index was up 5.7% the prior week. However, the October PPI data boosted optimism that US inflation may be peaking and was supportive for risk assets—the PPI month-over-month was reported at 0.2%, lower than anticipated.

In terms of monetary policy, we had a number of Federal Reserve (Fed) officials speaking last week. The messaging was a little mixed but seemed to suggest a slowdown in the pace of its tightening cycle, albeit with the threat that interest rates could remain higher for longer.

Concerns around US growth remain. Last week’s Empire Manufacturing Survey beat expectations at the headline level, coming it at 4.5%, but the underlying reading was weaker than expected, and pointed to growth concerns (falling new orders and rising inventories). The Philly Fed Survey was also weaker than expected (coming in at -19.4) and reflected a fall in new orders fell and the average work week.

The US housing market continued to slow, with existing home sales dropping 5.9% month-over-month.  The NAHB housing market index fell to 33 from 38 in the prior month.

In addition, US personal savings have slumped to levels last seen during the global financial crisis, demonstrating the pressure on the US consumer.

The crypto space remains in focus following the collapse of the FTX cryptocurrency group, as legal proceedings revealed the group owes US$3 billion to their largest creditors.

The US dollar steadied up a little last week after a sharp move lover from its 20-year highs in the wake of the CPI print. The US Dollar Index is down 4% from highs, though still up 11% year to date.4

Finally, the CNN Fear & Greed index suggests investor sentiment is comfortably in “Greed” territory—a sharp turn from highly fearful sentiment in a short space of time.5


Asian equities traded higher last week, with the MSCI Asia Pacific Index closing last week up 0.5%. However, as usual, performance was fairly mixed throughout the region. Hong Kong’s Hang Seng closed up 3.8% and Taiwan’s TAIEX Index was up 3.6%, whilst South Korea’s KOSPI lagged in the region, down 1.6%.

Chinese equities were in focus at the start of the week after the government rolled out a 16-point plan to bail out the country’s property market. It is hoped that measures, such as relaxing bank lending and offering special loans for project completion, will help the struggling sector. The market viewed the package as a government shift to a more accommodative policy stance, adding to positive changes to the COVID-19 prevention and control policy. News of positive talks between President Xi Jinping and US President Joe Biden at the G20 summit in Bali also helped sentiment.

The Hang Seng China Enterprises index entered bull market territory, up 20% from October lows. Chinese macro data underwhelmed on Tuesday, with industrial production data missing estimates and retail sales unexpectedly shrinking.

The Hang Seng outperformed in the region last week on reopening hopes and on news of the Chinese real estate package. There was also positive news in the gaming sector after the National Press and Publication Administration (NPPA) approved 70 new games on Thursday. There was broad strength in education stocks too after the Ministry of Education issued a new plan requiring that the construction of vocational school infrastructure was to be strengthened.

In Japan, the Nikkei closed the week down 1.3% as core inflation hit a 40-year high of 3.6% year-on-year in October. Whilst core and underlying measures are both above the Bank of Japan’s (BoJ’s) 2% target, board members have repeated that they expect inflation to fall back from next year, reflecting an unwind of energy prices and subsidies in the latest fiscal stimulus package. Following the CPI report, BoJ Governor Kuroda reiterated the need to maintain an ultra-loose policy.

Week ahead

Expect a quiet end to the week for markets with the US closed for Thanksgiving on Thursday and closed a half day on Friday. This should lead to quieter market volumes globally; for example, European volumes on US Thanksgiving Day have averaged 30% lower since 2010. With the holiday, all the US macro data is out Monday-Wednesday, including the Fed meeting minutes, which will be a focus.

In Asia, COVID-19 cases are on the rise in China, so this is a dynamic to keep a close eye on.

In Europe, we have the European Central Bank meeting minutes, a Riksbank monetary policy meeting, European and UK Purchasing Managers Index (PMI) data, and German IFO data.

Macro reports

Monday 21 November                    

  • Germany PPI

Tuesday 22 November                    

  • China Bloomberg November China Economic Survey
  • UK Public Finances (PSNCR)
  • ECB Current Account SA
  • Eurozone OECD Publishes Economic Outlook
  • Eurozone Consumer Confidence
  • US Richmond Fed Manufacturing Index
  • Australian PMI

Wednesday 23 November                     

  • German, UK, France, eurozone PMI data
  • US MBA Mortgage Applications; Durable Goods Orders, PMI, Initial Jobless Claims, University of Michigan Sentiment; Federal Open Market Committee meeting minutes

Thursday 24 November                         

  • Japan PMI; Machine Tool Orders year over year
  • France Business Confidence
  • Germany IFO Business Climate

Friday 25 November               

  • Germany GfK Consumer Confidence, GDP

Views you can use

PODCAST: Anatomy of a recession: Remain patient amid market gyrations

The value of dividends in any season

Franklin Mutual Series believes dividend payers can give value investors better total returns over the longer term. Read more.

Quick thoughts: An expanding universe in a volatile world—A focus on private real estate and private credit

Sustainability matters: The US prioritizes climate change

Inflation Reduction Act (IRA), climate and multi-asset implications—Franklin Templeton Investment Solutions examines the IRA from an investment lens. Read more.

Franklin Templeton ETF Capital Markets iView: A conversation with Senior Trader Andrew Black, Edinburgh

Head of EMEA ETF Capital Markets at Franklin Templeton, Jason Xavier, sits down with Andrew Black, a senior multi-asset trader in our Edinburgh office, to talk about trading ETFs in this interview, as part of our new “iView” series. Read more.


All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.  Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

Past performance is not an indicator or guarantee of future performance. There is no assurance that any estimate, forecast or projection will be realised.

Links to External Sites

Franklin Templeton is not responsible for the content of external websites.

The inclusion of a link to an external website should not be understood to be an endorsement of that website or the site’s owners (or their products/services).

Links can take you to third-party sites/media with information and services not reviewed or endorsed by us. We urge you to review the privacy, security, terms of use, and other policies of each site you visit as we have no control over, and assume no responsibility or liability for them.


This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data.  Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.


1. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

2. Source: Reuters, “Inflows into global equities hit 35-week high, BofA says”, 18 November 2022.

3. Sources: ONS, OBR.

4. Source: Refinitive. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

5. CNN’s Fear & Greed Index tracks seven indicators of investor sentiment. Indices are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges.

Get Content Alerts in My Inbox

Receive email alerts when a new blog is posted.