EUROPEAN EQUITY UPDATE: A busy earnings slate dictates the state of play for Europe

Analysis details (09:38)

European equities (Eurostoxx 50 +0.6%) trade on the front foot following the afternoon recovery seen on Wall Street yesterday with fresh macro impulses for the region relatively light today. The handover from APAC was a mixed one with outperformance in the Hang Seng (+2.4%) as participants in Hong Kong returned from the Lunar New Year holiday. Note, markets in Australia, China, Taiwan, India and Vietnam were closed. US equity futures are trading up (ES +0.1%, NQ +0.4%, RTY +0.2%) with the Nasdaq-100 outperforming after a constructive update from Tesla where its CEO was bullish on the demand outlook. Earnings will continue to remain in focus today, with updates due from the likes of Intel (INTC), Comcast (CMCSA), as well as credit card companies Visa (V) and Mastercard (MA). There is also a significant data docket today, by way of growth data for Q4 (which has the PCE price metrics for the quarter), weekly initial jobless claims, durable goods orders, more regional activity surveys, and trade data. Analysts at JP Morgan state that whilst major Equity market indices have posted a positive return YTD, its teams are more cautious from both a top-down and bottom-up perspective with JPM’s Chief Global Markets Strategist highlighting risks to both earnings expectations and equity flows. JPM’s European Equity Research teams hold their highest ratio of UW recommendations in over 5 years with the greatest cuts to numbers in Telecoms, Autos and Capital Goods. Elsewhere, analysts at Deutsche Bank suggest that the rally in US stocks has more room to run with a recession on course to set in later than previously expected; forecasts the S&P 500 to reach around 4.5k in Q1. Sectors in Europe are mostly firmer with Retail, Financial Services and Tech outperforming peers. The latter has been bolstered by post-earnings gains from STMicroelectronics (+7.5%) which is the best performer in the Stoxx 600 and boosting the likes of Infineon (+3.4%) and ASML (+1.7%). To the downside, Food, Beverage & Tobacco is the worst performing sector with Diageo (-4.7%) the laggard in the Stoxx 600 post-earnings which saw the Co. note a slowdown in North American sales. SAP (-3.5%) has been in focus throughout the session with the German Heavyweight underwhelming with Q4 results and announcing a 3k reduction in headcount. Tod’s (+5.8%) has helped prop up the luxury sector ahead of LVMH earnings after hours after the Co. posted encouraging earnings. Finally, Nokia (+4.8%) is another post-earnings gainer after beating on top and bottom lines.

26 Jan 2023 - 09:38- Research Sheet- Source: Newsquawk