EUROPEAN EQUITY NEWS: European stocks are choppy in the green whilst US futures are contained in the red

Analysis details (10:06)

It has been another choppy European morning for the equity complex, although the region holds onto gains (Euro Stoxx 50 +1.22%; Stoxx 600 +0.6%) following a positive lead from Wall Street but a more mixed APAC picture, as European large-cap earnings get underway. Conversely, US equity futures are subdued with the NQ (-0.5%) lagging vs the ES (-0.3%), RTY (Unch) and YM (-0.1%) as Netflix (-25% pre-market) shares plummeted after reporting subscriber losses for the first time in over a decade. Elsewhere regarding the Twitter saga, sources via the NY Post suggested Elon Musk is facing hurdles in raising the money to acquire Twitter, “some investors appear skittish over his pattern of unpredictable behavior and taste for controversy”, the sources added. In terms of broader market commentary, strategists at UBS recommend that investors add to portfolio hedges – with commodity and energy stocks in a good position against the backdrop of geopolitical risks and high inflation. “Investors should also consider building exposure to more defensive equity sectors such as global healthcare, or select quality stocks that offer attractive dividend yields, free cash flows, and a sustainable return on equity, as they usually outperform at times of high volatility”, UBS says, adding that “Periods of heightened volatility and uncertainty can offer longer term entry points in areas of structural growth… Such as 5G, automation, smart mobility and robotics”. The Swiss bank’s base case is for the US to avoid a recession, whilst the US earnings season is forecast to be positive – “we forecast earnings per share growth of 10% for 2022 overall and 7% for 2023”, the desks said. Back to today’s trade, European bourses are firmer to varying degrees amid a myriad of notable corporate updates. The CAC 40 (+0.9%) is propped up by Danone (+7.8%) following their earnings alongside reports Lactalis advisor Perella Weinberg is reportedly considering scenarios for a partial or total takeover of Danone, according to French press. However, the index’s upside is capped by heavyweight L’Oreal (Unch) post-earnings after missing on consumer products LFL and North American sales - L’Oreal accounts for around 6.3% of the index based on yesterday’s close. Note, France also looks ahead to the French Election TV Debate (20:00BST/15:00EDT) - on this Oddo analysts suggest “market inertia implies that French political risk may be encapsulated in fear of a widespread macro slowdown.” Meanwhile, the Dutch AEX (+1.1%) outperforms the region as European behemoth ASML (+5.5%) soars after topping its Net and Revenue forecasts, albeit Q2 guidance missed forecasts; ASML holds a 9.0% weighting in the Euro Stoxx 50 and a 12.8% weighting in the AEX. Over to the UK, the FTSE 100 (+0.4%) has been the regional underperformer throughout the session thus far – namely with Rio Tinto (-2.6%) pressured after an underwhelming Pilbara mining update – with the Co. accounting for around 3.1% of the UK large-cap index. Rio Tino drags on the broader Basic Resources sector which resides as the sectoral laggard at the time of writing, whilst the upside sees Tech (amid gains in ASML) and Banks – with the latter propped up by the recent rise in yields. The banking sector has also shrugged off losses in Credit Suisse (-1.5%) which issued a profit warning after upping their total litigation provisions by around CHF 600mln. In terms of other moves, Just Eat Takeaway (+3.0%) is firmer despite Q1 orders missing forecasts, as the delivery name is said to be in talks to sell its Grubhub unit.

20 Apr 2022 - 10:06- EquitiesResearch Sheet- Source: Newsquawk