EUROPEAN EQUITY OPEN: Stocks start higher; HEINA NA, PHIA GY, MRK GY top estimates; UK fiscal announcement ahead

EUROPEAN OPEN: Overnight, APAC stocks were higher, resuming the momentum after Friday’s gains on Wall St. European equities start the week on the front foot ahead of a busy week for macro updates. The morning has been dominated by earnings once again, with Heineken (HEIA NA) lifting guidance, Philips (PHIA NA) beating on profits, Merck (MRK GY) beating earnings estimates (see below). The docket for the day ahead is thin; UK traders will note the Chancellor will a statement on public finances in the afternoon (see below for our primer). This week, there will be earnings updates from US major names including AAPL, MSFT, AMZN, META. The week also features policy announcements from the BoE, FOMC, BoJ, while the US will also release jobs data for July (our week ahead link is below, in the research links section).

STOCK SPECIFICS: In M&A, Teck Resources (TECK) is reportedly drawing M&A attention from the biggest miners in a rush for copper. Czech billionaire Kretinsky’s GBP 3.6bln bid for Royal Mail (IDS LN) is reportedly under threat as city investors accounting for over a fifth of IDS are planning to vote against the offer in September. Euronext (ENX FP) CEO said a combination with any large exchange in Europe could result in synergies, adding that it is monitoring situations, and is ready to strike or jump on any situation that becomes actionable. Ocado (OCDO LN) CEO does not currently want to sell its remaining stake in the online JV with M&S (MKS LN). In earnings, Merck (MRK GY) topped earnings estimates in Q2 amid outperformance in its healthcare and electronics units, and raised guidance. Heineken (HEIA NA) missed profit estimates in H1 amid a USD 1bln impairments on its Chinese operations, but has raised its FY guidance. Philips (PHIA NA) reported a Q2 profit beat, supported by North America and its restructuring plan, and reiterated guidance. Elsewhere in healthcare, Roche (ROG SW) CEO said its first obesity drug will arrive on the market significantly sooner than people were expecting, perhaps as early as 2028. In notable broker updates, Sandoz (SDZ SW) was initiated with an Overweight raring at Barclays, Drax (DRX LN) was downgraded at Morgan Stanley, Evotec (EVT GY) was downgraded at Morgan Stanley, Hugo Boss (BOSS GY) was downgraded at Stifel.

TODAY’S AGENDA:

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  DAY AHEAD: The ECB will release parts of its economic bulletin, with today’s update focussing on “the evolution of China’s growth model: challenges and long-term growth prospects”. In the UK, the BoE will release money and credit statistics for June, and the CBI will publish its distributive trades data for July. Elsewhere, UK Chancellor Reeves will make an announcement on public finances where she will reveal cuts to plug a GBP 20bln ‘black hole’ in public finances. The US Day sees the release of the Dallas Fed Manufacturing data for July. Today’s notable corporate earnings reports include: MCD, WELL, and ON.


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  UK FISCAL ANNOUNCEMENT: Chancellor Reeves will at 15:30BST/10:30ET announce to MPs that there is a GBP 20bln hole in public finances due to the prior Conservative government overspending in the 2024/25 financial year. In short, immediate spending cuts are expected to be announced and while tax increases (i.e. capital gains) cannot be ruled out it is more likely that the statement tees the government up for tax increases in the autumn budget. (See below for the link to our preview).

29 Jul 2024 - 08:10- EquitiesEU Research- Source: Newsquawk