EUROPEAN EQUITY OPEN: Stocks open around flat amid a heavy slate of earnings updates; lots of ECB speak and minutes ahead

• 
  OVERNIGHT: Wall Street saw another choppy session, with initial losses pared gradually as the VIX hit lows not seen since 2021 (see our US market wrap here). Overnight, APAC stocks were rangebound following a flat handover from Wall Street (see our APAC wrap here). New Zealand CPI cooled to 1.2% Q/Q (exp. 1.7%, prev. 1.4%), with the annual measure paring to 6.7% Y/Y (exp. 7.1%, prev. 7.2%); Westpac noted that inflation was weaker than expected, and has now fallen short of the RBNZ's forecasts for a second quarter.


• 
  EUROPEAN OPEN: Stocks have opened around flat/mixed after a heavy morning of corporate earnings (see below), ahead of ECB meeting minutes and a heavy dose of commentary from ECB officials today. Today's ECB meeting minutes will be looked at for clues about whether the central bank will lift rates by 25bps or 50bps in May, although commentary from officials may be more useful; there are a lot of ECB speakers around today (see Day Ahead, below), and hawk Knot has already been out with some comments in the pre-market, where he said the central bank may need to raise interest rates again in both June and July, in addition to the expected 25bps hike in May, and did not seem uncomfortable with current market pricing, which alludes to another 75bps of tightening ahead. Data released this morning showed German Producer Prices falling 2.6% M/M in March (exp. -0.5%, prev. -0.3%) with the annual gauge paring to 7.5% Y/Y (exp. 9.8%, prev. 15.8%). From France, the manufacturing business climate index cooled to 101 in April (exp. 103.0, prev. 104.0); flash PMI data on Friday will help refine analysts views.


• 
  STOCK SPECIFICS: Corporate earnings are dominating, with a number of high-profile companies reporting. Our full daily European equity briefings can be accessed here and here. Highlights include: in consumer sectors, L'Oreal (OR FP) sales rose 13% LFL in Q1 (exp. 8.08%), supported by US and Europe markets. Deliveroo (ROO LN) saw revenues rise but orders slip. In tech, the world's largest contract chipmaker Taiwan Semiconductor Manufacturing Company (TSM) reported profits rose in Q1 by 2%, exceeding consensus expectations, but was still the smallest quarterly profit growth in around four years as global economic conditions weighed on demand for chips; revenues slipped by almost 5% Y/Y, in line with the company's guidance. Nokia Oyj (NOKIA FH) sales topped expectations but profits were a touch short, and exec said it was starting to see some signs of the economic environment impacting customer spending. Tech names will also note that IBM (IBM) shares rose 1.7% after a mixed earnings report, although it topped expectations on EPS, Software Revenue, and adj. gross margins. In autos, Renault SA (RNO FP) sales rose 30% in Q1 on higher prices.  Volvo AB (VOLVB SS) lifted its outlook for European and North America segments as European supply issues fade. Auto names will also note Tesla (TSLA) reported earnings after the US close, where margin compression was not received well, and shares slipped in afterhours trading. For ad names, Publicis Groupe SA (PUB FP) said sales rose as data-driven businesses saw strength. Once again, there was a lot of equity news out this morning, and we encourage you to review our full daily European equity briefings can be accessed here and here for a full briefing.

DAY AHEAD:

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


• 
  EUROPEAN DATA/SPEAKERS: The main event is the meeting minutes from the ECB’s March meeting; ahead of the May 4th policy meeting, the debate seems to be on whether it lifts rates by 25bps or 50bps, and traders will look for clues within the minutes. That said, it is worth noting that we have had more timely commentary from key ECB officials this week, most notably, chief economist Lane who essentially reiterated the central bank's data dependent stance, adding that the April bank lending survey will be an important input for the May meeting. We have more thoughts detailed below. Elsewhere, Eurozone flash consumer confidence for April and trade data for February will be released. On the speaker’s front, ECB President Lagarde will give (another) set of comments, though today’s will be from a pre-recorded event; ECB’s markets chief Schnabel will speak again today too. ECB's de Cos, Visco and Holzmann are also due to speak. From the UK, BoE dove Tenreyro will give comments. On the supply front, Spain will sell between EUR 5.5-6.5bln of 2029, 2033 and 2048 debt; France will sell between EUR 10-11.5bln of 2026 and 2029 debt, as well as between EUR 1.25-1.75bln of 2028 and 2053 linkers.


• 
  NORTH AMERICAN DATA/SPEAKERS: Weekly initial jobless claims data coincides with the survey window for the monthly US jobs data, and is expected to be little changed in the week; similarly continuing claims (next week’s continuing claims data will coincide with the monthly jobs data) are seen little changed. The April Philly Fed survey will help to shape expectations for the ISM data due early May; this week, the Empire Fed equivalent surprised to the upside, giving hopes the ISM Data could look decent too. Existing home sales for March are seen poaring a touch vs Feb levels. The US leading index for March is expected to worsen. It is a busy docket for Fed speakers, as they clamour to get their commentary in ahead of the blackout window that begins at the end of this week ahead of the May policy meeting: Fed's Waller (voter) will speaking on Global Interdependence; he recently backed an interest rate hike in May, and said high inflation and a strong jobs market meant that policy needed to be tightened further. Fed 2023 voter Logan has not made policy related remarks since February, when she was arguing that the Fed’s primary focus was to reduce inflation. Fed 2024 voter Mester will speak on the economic policy outlook; she recently argued that an interest-rate cut – as money markets are pricing – would be 'bad policy' at this point. Fed's Bowman (voter) is also due to make comments, as is Fed's Bostic - both have spoken in recent days. From Canada, the BoC’s Macklem and Rogers are due to make comments. On the supply front, the US will sell USD 21bln of 5yr TIPS.


• 
  US CORPORATE EARNINGS: Earnings reports are due from BX, TSM, T, PM, AXP, UNP; our full earnings estimates are available here. Other notable companies reporting this week include PG on Friday; our full Weekly US Earnings Estimates can be accessed here.


• 
  ENERGY: WTI May 2023 futures expire today. The EIA will release weekly NatGas inventory data; this week, the street looks for a build of 69BCF after last week's build of 25BCF.


• 
  PREVIEW – ECB MEETING MINUTES (12:30BST/07:30EDT): Despite market pricing ahead of the meeting being around 65% in favour of a 25bps hike at the meeting, the ECB defied calls for such a move and stuck with its February guidance of a 50bps increase. The Governing Council justified such a move by noting that inflation was projected to remain too high for too long. With regards to financial stability, the statement noted that “the euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed”. From a guidance perspective, the GC is no longer guiding towards rate hikes and merely refers to “rate decisions”, which will be data-dependent. At the follow-up press conference, Lagarde noted the Board proposed no other option compared to the one taken. This decision was adopted by a very large majority, though three or four did not support the decision and wished to wait for more time. In the wake of the meeting and press conference, Reuters ECB sources noted the debate at the meeting was for either 50bps, or an unchanged decision, and that policymakers opted for the 50bp move after the SNB lifeline to Credit Suisse, while there was no discussion of a 25bp move. Bloomberg sources also noted that policymakers feared that ditching their 50bp hike guidance might panic investors, while on the terminal rate, hawkish officials still saw rates well above the current 3% level, although the doves questioned whether the peak may be lower than initially thought. Any further colour on these discussions and what they could mean for the May meeting will be of note for the market, however, as always, the account of the decision may be deemed as stale in some quarters.

20 Apr 2023 - 08:10- Fixed IncomeData- Source: Newsquawk