EUROPEAN EQUITY UPDATE: Europe coat-tails on Wall Street’s rebound whilst earnings pick up

Analysis details (10:21)

A turnaround Tuesday for European stocks thus far as global equity markets feel some reprieve following the bout of selling seen in recent sessions, whilst Wall Street saw an afternoon rebound on Monday. Since the European open, broader equities initially drifted lower before finding a firmer footing. US equity futures trade relatively flat with a mild downside bias (ES -0.1%, NQ -0.1%, RYT -0.1%, YM -0.1%), trimming earlier losses. Strategists at Citi suggest that the equity markets may have found a floor, at least for now, with the bank highlighting slowing ETF outflows and futures repositioning, indicating “we are near peak investor bearishness across equity markets, though there are not yet any bullish reversals…Going forward, there may increasingly be a bias towards unwinding the large short positions”, Citi says. In terms of today’s trade, relatively broad-based gains are seen across the European majors (Euro Stoxx 50 +0.9%; Stoxx 600 +0.9%) with no significant standout performers. Sectors are all in the green but to varying degrees – with Basic Resources rebounding with a vengeance after yesterday’s slide, albeit Energy has failed to hold onto early gains as the underlying commodity price wanes. Banks have been in focus this morning after a few heavyweights reported, but the performance in Q1 was mixed, with profits at HSBC falling in the quarter, but UBS overall reporting upbeat earnings. Nonetheless, the banking sector remains one of the laggards as yields also pull back. Delving deeper into earnings, HSBC’s (-3.7%) profits fell on credit charges due to Ukraine conflict and inflation and does not see buybacks this year; UBS (+2.1%) profits saw an upside surprise in Q1 relative to expectations. Deutsche Boerse (+3.0%) lifted its 2022 guidance after Q1 topped expectations. Maersk (+6.0%) had a solid quarter and raised profit guidance, albeit it lowered its view of overall container demand. Associated British Foods (-6.0%) profits almost doubled in H1 after a strong performance at Primark, which is to implement selective price increases as inflation hampers retailers’ outlooks – with last week’s UK Retail Sales data not boding well for the sector. Orange (+0.4%) reported mixed sales (Spain -4.6%, but Africa/Mideast +8.7%) and affirmed guidance. State-side, Twitter (+0.4% pre-market) shares trade under the USD 52/shr mark in early pre-market after Elon Musk’s USD 54.20/shr bid for the social media firm went through.

26 Apr 2022 - 10:20- EquitiesResearch Sheet- Source: Newsquawk