EUROPEAN EQUITY UPDATE: Eurostoxx 50 and CAC 40 dragged lower by Sanofi

Analysis details (09:14)

• European equities (Eurostoxx 50 -0.3%) are a mixed bag in what has been a session light on macro updates but heavy on corporate earnings. Equity sectors in Europe are mixed with outperformance seen in the Energy sector alongside upticks in the crude space. Chemical names are also on the front foot thanks to post-earnings gains in Covestro (+2.5%) which saw the Co. raise the bottom end of its guidance. To the downside, Health Care names lag following a poor earnings release from French heavyweight Sanofi (-15.0%) which sits at the foot of the Stoxx 600 and is acting as a drag on the Eurostoxx 50 and CAC (-0.7%); note, the Co. also announced it is looking into a separate listing for its consumer healthcare business as of Q4 2024. Media names are also lower amid losses in Universal Music Group (-7.3%) with Co. shares unable to benefit from the Taylor Swift effect on Q3 results. It’s been another busy day for the banking sector with well-received earnings from Danske Bank (+5.7%), Caixabank (+2.2%) and Sabadell (+3.2%), whilst Natwest (-10.4%) shares have slumped after the Co. lowered NIM guidance alongside earnings. Finally, Remy Cointreau (-9.4%) is acting as a drag on the alcohol sector after lowering sales guidance within its H1 results. As it stands, JP Morgan notes that 57% of Stoxx 600 companies that have reported have exceeded EPS estimates with EPS growth seen at -8% Y/Y. Note, the latest BofA Flow Show revealed that USD 2.1bln left equity funds in the week to October 25th with Europe seeing a 33rd consecutive week of outflows at USD 2bln.


• APAC stocks eventually traded firmer across the board as the well-received earnings from Amazon and Intel pushed sentiment into the positive after the mostly lower close on Wall Street. ASX 200 (+0.2%) supported by its Consumer Staples sector, while an uptick in M/M PPI had kept the Industrial Sector’s gains capped, and Tech had resided as the laggard. Nikkei 225 (+1.4%) saw its gains driven by its Industrial sectors, potentially following the US GDP metrics, while the Pharma sector lagged as Takeda shares slumped over 7% following their earnings. Hang Seng (+1.8%) and Shanghai Comp (+1%) opened mixed with the former firmer as its earnings season picked up and as the Hang Seng Tech index rose over 2%. Sentiment for the Mainland was initially muted but improved, while reports via China’s Securities Journal suggested China was likely to reduce the reserve requirement ratio in Q4 to support government bond issuance.


• US equity futures (ES +0.5%, NQ +0.8%, RTY +0.5%) are on a firmer footing as Amazon shares rose by over 5% in the after-market as the Co. was bullish on AWS in its conference call, while Intel shares had soared 7.5% amid high demand for AI products. Note, today’s pre-market earnings docket will see focus on the energy sector with CVX, XOM, LYB and PSX due on the docket. As it stands, JP Morgan notes that 78% of S&P 500 companies that have reported have exceeded EPS estimates with EPS growth seen at 12% Y/Y. From a macro perspective, monthly PCE data for September is the main highlight with Y/Y core PCE expected to full back to 3.7% from 3.9% whilst the M/M rate is expected to rise to 0.3% from 0.1%. Ahead of the release, Pantheon Macroeconomics writes that "the annual rate will remain elevated, dipping to 3.7% from 3.9% in August, but the Fed will not wait until 2% Y/Y is reached before starting to ease." There will also be attention on Personal Income and Consumption to gauge the strength of the consumer, with income seen rising 0.4%, matching the prior month's pace, while consumption is seen rising 0.5% from 0.4% previously.

27 Oct 2023 - 09:14- Research Sheet- Source: Newsquawk