EUROPEAN EQUITIES UPDATE: Stocks are mostly lower but chip names are boosted as NVIDIA surges over 20% post-earnings

Analysis details (09:25)

• Stocks in Europe now trade mostly lower as the initial mixed picture dissipated despite a lack of fresh fundamentals since the open, whilst the mostly-downbeat tone from the APAC region seemingly reverberated into Europe. That being said, global chip names are benefitting from earnings from NVIDIA (+23% pre-market) - which surged on the back of earnings and forecasts topping expectations, with AI underpinning outlook. Thus, US equity futures see a mixed picture with marked outperformance in the NQ (+1.4%) – with NVIDIA accounting for 5.6% of the Nasdaq 100 – whilst the ES (+0.4%) also benefits from the chip name’s 2.2% weighting in the SPX. Conversely, RTY (-0.5%) and YM (-0.4%) see mild losses. To recap, stocks on Wall Street fell as debt ceiling talks once again failed to yield a breakthrough, while the rising risk of default prompted Fitch Ratings to place the US on rating watch negative (see our recap), whilst little reaction was seen in this space from the FOMC Minutes – which were largely in-fitting with recent Fed speakers’ commentary.


• Back in Europe, equities are subdued (Euro Stoxx 50 -0.2%; Stoxx 600 -0.3%), whilst the Dutch AEX (+0.4%) bucks the trend, lifted by European heavyweight ASML rising some 5% (WEIGHTINGS: 15.9% in the AEX, 7.7% in the Euro Stoxx 50, 2.4% in the Stoxx 600), whilst most chip names see tailwinds on the back of NVIDIA. Elsewhere, German stocks are despondent (DAX -0.5%) as the latest Q1 German GDP metrics showed the German economy in a winter recession – “The downward revision to Germany’s Q1 GDP means that the country has fallen into a technical recession and that euro-zone GDP probably stagnated in Q1 rather than expanding by 0.1% q/q. We expect further economic weakness in both Germany and the euro-zone as a whole in the coming quarters.”, analysts at CapEco say.


• Sectors in Europe are mostly lower, with the exception of Tech and Healthcare, with the former outperforming by a large gap. Overall, sectors do not portray a particular bias, although some of the defensive sectors reside towards the top of the bunch. The downside sees notable underperformance in Retail, followed by Media, Banks, and Autos. In terms of individual movers, the top of the Stoxx 600 largely consists of chip names, whilst H&M (-2.3%) shares are weighed on by earnings from US peer American Eagle Outfitters (-20% pre-market) who offered weak guidance.

25 May 2023 - 09:25- EquitiesEU Research- Source: Newsquawk