EUROPEAN EQUITY UPDATE: Earnings dictate the state-of-play for Europe

Analysis details (09:36)

European equities (Eurostoxx 50, Unch) trade with little in the way of firm direction in what has been a very busy morning of earnings for the region amid a lack of fresh macro drivers. Europe has been unable to follow on from the positive APAC session, which saw prices underpinned by the strong close on Wall Street yesterday. US equity futures are mostly lower (ES -0.6%, NQ -1.4%, RTY +0.5%), with the tech-heavy Nasdaq-100 leading the downside after disappointing earnings from Microsoft (MSFT) and Google (GOOG), while the outlook from Texas Instruments (TXN) missed the consensus expectations, and South Korean chipmaker SK Hynix also warned on chip demand. It’s another busy day for US earnings, with focus on TMO, ADP, BMY, GD, BA, META, F, NOW. Data-wise, the docket is a little thinner today, but there will be attention on US MBA mortgage applications data given other housing metrics are now beginning to show some of the challenges within the sector (yesterday’s Case-Shiller and FHFA are the latest examples); New home sales data for September will also be eyed. US advanced goods trade balance is also due for release. In terms of desk views, Goldman Sachs are doubtful that the conditions for a trough in US equities are in place yet as prices are yet to reflect the odds of a recession and the recent increase in real yields. Note, GS believes that the S&P 500 could slip to 2888 (closed yesterday at 3859) in the event of an economic downturn. Sectors in Europe are mixed with Construction names top of the leaderboard following 9M results from Vinci (+1.8%), whilst Chemical names are also on a firmer footing amid post-earnings gains for BASF (+1.8%), who is also helping the DAX (+0.5%) to modestly outperform peers. To the downside, Personal Goods names lag following Q3-inspired earnings losses for Reckitt (-4.5%) which sees the Co. as the worst performer in the FTSE 100. Food and Beverage names are lagging with Heineken the worst performer in the Stoxx 600 after the Co. acknowledged signs of softness in consumer demand alongside Q3 earnings. Elsewhere, It’s been a busy morning for the Banking sector following earnings from UniCredit (+3.4%), Santander (-4.5%), Deutsche Bank (-1.3%), Standard Chartered (-1%) and Barclays (-0.8%). Finally, adding to the woes for the tech sector, ASM International (-7.7%) is one of the worst performing stocks in Europe as export restrictions from the US hampered the Co. in Q3.

26 Oct 2022 - 09:36- Research Sheet- Source: Newsquawk