EUROPEAN EQUITY OPEN: Stocks open a little beneath flat ahead of busy week for earnings and data

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  OVERNIGHT: On Wall Street, stocks traded sideways on Friday, while the VIX remained near lows for the year, despite strong PMI data, where manufacturing activity returned to expansionary territory for the first time in six months (Our US wrap from Friday can be accessed here). Asia-Pac stocks were mixed overnight, with price action mostly rangebound after the lack of fresh macro drivers over the weekend, and as participants brace for this week’s key events, including the big US tech earnings and the first BoJ meeting under Governor Ueda’s leadership (our APAC wrap is here).


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  EUROPEAN OPEN: Equity indices start the week in a subdued fashion, amid a light weekend of macro catalysts. Earnings and M&A are in focus today (we recap in the stock specific section, below). Ahead, Big Tech earnings in the US will be in focus, but in Europe, big banks like Barclays (BARC LN), Deutsche Bank (DBK GY), Santander (SAN SM), and UBS (UBSG SW) will report. The Fed is in blackout this week, but key US data will be of note to Macro traders (PCE and GDP being the highlights, see Day Ahead section below for the link to our weekly briefing). For today, the calendar is quiet ahead of the big week.


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  STOCK SPECIFICS: Of note for German names, public sector workers in Germany have agreed on a wage deal with employers, according to ministers cited by Reuters. The agreement encompasses around 2.5mln workers. In M&A, Software AG (SOW GY) has received an offer to be acquired by Silver Lake for EUR 30/shr (vs Friday's EUR 19.97 close). Zurcher Kantonalbank has reportedly held recent discussions with GAM (GAM SW) about acquiring the business. In earnings, Koninklijke Philips NV (PHIA NA) adj. EBITDA topped expectations in the quarter as comps rose +5.7% Y/Y (exp. +2.2%), and it made EUR 575mln in provisions for recall litigation costs. In financials, shareholder advisory group ISS said HSBC (HSBA LN) investors should vote against a proposal from the bank's largest shareholder Ping An which seeks to spin-off its Asia unit, stating it lacks a detailed rationale. Credit Suisse (CSGN SW) experienced significant net asset outflows, in particular during the second half of March; since then, outflows have moderated but are yet to reverse. Swiss bank UBS Group (UBSG SW) is said to be mulling mass job cuts, and is suggesting the merger with Credit Suisse is yet to be finalised. In consumer sectors, Adidas AG (ADS GY) China country brand manager said 2022 was difficult, and 2023 probably won’t be much easier. Shadowfall has reportedly built a short position in Asos (ASC LN). In tech, UK is to create new regulator to tackle Big Tech, and will initially target a small number of companies generating at least GBP 25bln in global turnover, or GBP 1bn in the UK. Softbank’s (SFTBY) Arm will reportedly team up with manufacturing partners to develop the new semiconductor.  In energy, Norway's oil fund is to vote against a resolution calling on BP (BP/ LN) to adopt tougher climate targets. Our full European equity specific briefings for April 24th can be accessed here and here.

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: It is a quiet day for European data releases, but there will be attention on the German Ifo metrics for April; last week, Eurozone PMI data generally surprised to the upside, with some constructive commentary within the reports, which fuelled expectations that the ECB could opt for a larger-sized rate hike at its May meeting (the debate is currently said to be between 25bps or 50bps). Last week, influential ECB speakers (chief economist Lane and markets chief Schnabel) did not provide any explicit steer, instead advocating a data-dependent approach; speakers today include ECB Vice President de Guindos (subject matter suggests speech will not be relevant for macro) and the ECB’s Panetta (risks his speech could be a snoozer too).


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  NORTH AMERICAN DATA/SPEAKERS: The National Activity Index for March and the Dallas Fed Manufacturing Index for April are the only items of note. The latter will perhaps be more important within the context of an upside surprise in the Empire Fed April survey, a downside surprise in the Philly Fed survey, although the broader PMI indices from S&P Global saw both manufacturing and services top consensus expectations; these data all help shape expectations of what the Manufacturing ISM will look like when it is released on May 1st. NOTE: The Fed is in blackout now ahead of its May 3rd meeting; analysts expect the central bank will lift rates by 25bps at that meeting, but perhaps the more interesting debate centres around whether it will hike again in June (some negligible probability priced in by markets), and whether it will follow-through on market pricing for rate cuts further out this year.


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  US CORPORATE EARNINGS: Highlights on today’s US corporate earnings slate includes KO, FRC, CDNS (see here for expectations). It is a very busy week for corporate earnings; major companies reporting include: DHR, PEP, UPS, GE, RTX, MCD, NEE, VZ, GOOGL, TXN, MSFT, V on Tuesday; TMO, BA, META on Wednesday; AZN, LLY, CAT, MRK, BMY, CMCSA, SPGI, ABBV, MA, AMZN, AMGN, INTC, TMUS on Thursday; CVX, XOM on Friday. Our full weekly earnings expectations note can be accessed here.


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  WEEK AHEAD: In the week ahead, Major releases include: US GDP, PCE, ECI; EZ GDP; Aus CPI; BoJ, BoC mins, CBRT; our full week ahead briefing can be accessed here.


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  EARNINGS SCORECARD: At the end of last week, the S&P 500 earnings scorecard shows that although firms have thus far reported Q1 2023 revenues have risen by 1.9%, earnings have declined by 4.7%, according to data from Refinitiv. Earnings are holding up better in the Consumer Discretionary sector (+38%), Industrials (+17%), Energy (+12%) and Financials (+7%). Materials are the laggards, where profits are down 32%, followed by Healthcare (-19%) and Tech (-14%); Utilities, Communications, Real Estate and Consumer Staples are also reporting lower profits. Highlights on today’s US corporate earnings slate includes KO, FRC, CDNS (see here for expectations). It is a very busy week for corporate earnings; major companies reporting include: DHR, PEP, UPS, GE, RTX, MCD, NEE, VZ, GOOGL, TXN, MSFT, V on Tuesday; TMO, BA, META on Wednesday; AZN, LLY, CAT, MRK, BMY, CMCSA, SPGI, ABBV, MA, AMZN, AMGN, INTC, TMUS on Thursday; CVX, XOM on Friday. Our full weekly earnings expectations note can be accessed here.


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  TECH EARNINGS THIS WEEK: US tech earnings are in focus ahead of this week’s quarterly results from the likes of Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), Alphabet (GOOG). The Tech sector has been one of the laggards in early Q1 reporting, with earnings down 14% as sales fall about 5%, according to Refinitiv data. That said, there are some hopes of a better performance relative to consensus expectations, given around 88% of the eight S&P 500 tech firms reporting thus far have exceeded earnings estimates, which is currently tracking above the S&P 500 as a whole. Wedbush Securities is telling its clients to expect upside in tech earnings, noting the cost cutting and job shedding occurring in the industry, while it also believes that a major narrative of will be the AI ‘arms race’ as companies update investors on their own AI ambitions and monetisation strategies.

24 Apr 2023 - 08:10- Data- Source: Newsquawk