EUROPEAN EQUITIES UPDATE: Stocks lose steam as sanctions sully sentiment

Analysis details (10:18)

Equities in Europe have been extending on the modest downside seen at the cash open, with sentiment sullied by China imposing unspecified sanctions on House Speaker Pelosi amid her trip to Taiwan. US equity futures were dented and now trade flat intraday with a broad performance seen across the contracts. With Q2 earnings season dying down, analysts at Deutsche Bank suggest the “earnings beats in the US are average at best, and strong earnings growth headline hides a contraction outside energy”. The desk adds that “excluding energy, consensus estimates have been falling since the beginning of 2Q season. 3Q estimates are down in all regions, while 2023 consensus is flat for Europe and down in the US.” Meanwhile, BofA’s weekly flow show revealed that the Bull & Bear indicator at “extreme bearish”, as it reported outflows from US equities resuming – the bank is fading the SPX above 4200 – “if wrong, EM debt, banks & resources best hedges for further upside.” In terms of European commentary, BofA analysts see 10% downside in European stocks by the end of this year and cut its Stoxx 600 year-end target to 390. Back to the session, sectors are mixed with no clear bias and with the breadth of the market relatively narrow. Basic Resources and Autos sit at the top of the bunch, with the latter possibly aided by Tesla (+0.3% pre-market) CEO Musk suggesting inflation is past the peak. Media and Energy lag, with the former, weighed on by WPP (-7.8%) post earnings, and the latter by the recent dip in crude prices. In corporate-specific news updates: EDF (+1.4%) is reportedly mulling the sale of its Edison (+1.0%) unit, which could fetch up to EUR 6bln. Volkswagen's (+0.1%) Porsche is reportedly approaching Middle Eastern sovereign wealth funds in a bid to anchor investments. Finally, Ahold Delhaize (-0.6%) is said to be postponing the IPO of bol.com amid market conditions.

05 Aug 2022 - 10:15- Research Sheet- Source: Newsquawk