EUROPEAN EQUITY UPDATE: Europe fades opening gains in a busy day of earnings

Analysis details (09:40)

European equities (Eurostoxx 50 Unch.) have scaled back opening gains that were viewed as a catch-up play to the FOMC-inspired upside on Wall Street yesterday which also proved to be supportive for APAC stocks overnight. At pixel time, indices in Europe are mixed with some of the discrepancies in the region dictated by an exceptionally busy earnings slate and an absence of fresh macro drivers since yesterday’s close. US futures (ES -0.3%, NQ -0.9%, RTY Unch.) trade on a softer footing following yesterday’s strong close on Wall St. which saw the S&P 500 close with gains of 2.6% with the Nasdaq outpacing peers to close higher by 4.1% post-FOMC. After-hours sentiment was dented by earnings from Meta (-5.3% pre-market) after the Co. reported a decline in revenues and soft outlook. The earnings slate is a busy one once again with Merck, Honeywell, Pfizer, Comcast, Altria and Mastercard all due pre-market with Amazon, Apple and Intel due to report after the close. From a macro perspective, focus will be on today’s Q2 advanced reading of GDP whereby analysts expect the data to print +0.5%, which would avoid two consecutive quarters of negative growth. Nevertheless, the Atlanta Fed's tracking, and the fact that many analysts have forecast a negative print, will keep growth concerns alive. From a strategic standpoint, analysts at Berenberg recommend selling rallies and keeping active hedging strategies over the next few months in lieu of risks of a decline in EPS growth in H2 2022 and into 2023. Sectors in Europe are mixed with notable outperformance in Basic Resources alongside gains in underlying commodity prices as well as earnings-inspired upside in Anglo American (+5.1%) and ArcelorMittal (+5.4%) who sit at the top of the FTSE 100 and CAC 40 respectively. Elsewhere, Construction and Auto names also trade on a firmer footing with the latter bolstered by earnings reports from Stellantis (+3.2%) and Volkswagen (+2.3%). To the downside, Telecom names sit at the bottom of the pile amid losses in BT (-5.9%) despite the Co. reporting an increase in revenue with some investors concerned by ongoing strike action. Food and Beverage names have been hampered by post-earnings downside in index heavyweight (circa 30% weighting) Nestle (-1.8%) and Belgian brewer AB Inbev (-3.5%). Finally, reports from large-cap energy names Shell (+1.3%) and Total (-2.8%) have been received with a mixed reaction by the market with both companies extending their share buyback programmes.

28 Jul 2022 - 09:40- EquitiesData- Source: Newsquawk