EUROPEAN EQUITY UPDATE: Incremental losses ahead of a busy week of earnings

Analysis details (09:35)

• European equities (Eurostoxx 50 -0.2%) trade with marginal losses in what has been a slow start to the week for the region asides from mixed German IFO data which saw a beat for the current conditions and expectations metrics, leaving the overall business climate print a touch below expected.


• Asia-Pac stocks were mixed overnight, with price action mostly rangebound after the lack of fresh macro drivers over the weekend, and as participants brace for this week’s key events.


• Stateside, US futures (ES -0.4%, NQ -0.4%, RTY -0.4%) trade on the backfoot after Friday’s sideways trade. US Earnings season will come thick and fast this week with several high-profile tech names on the slate including Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), Alphabet (GOOG); tech names have been one of the weaker performers in Q1 thus far though updates from these giants will refine that narrative. Key US data this week sees the Fed’s preferred gauge of inflation, PCE; we also have advanced Q1 growth numbers, that will give a temperature on how the resilient US economy has been operating in the face of higher rates amid still high consumer prices. Additionally, events in Washington will be on the minds of traders, as the Debt Ceiling debacle continues with reporting from the Washington Post suggesting that Republicans have made it increasingly clear that they are willing to court economic catastrophe unless they secure major policy concessions from the White House.


• Analysts at JP Morgan say they are overweight international equities vs. the US “and within this specifically Europe vs the US”. JPM has questioned whether this trade should be closed given that “internal leadership might become increasingly difficult for Europe to keep beating the US”, adding that “it appears that the consensus call these days is to be OW Europe vs the US, and the region has strongly outperformed in the past few quarters”. The desk remains overweight Europe vs. the US “for now” but suggests that the time for taking profits is nearing.


• Equity sectors in Europe are mixed and relatively narrow in terms of breadth with Financial Services top of the leaderboard with UBS (+1.6%) a notable gainer ahead of upcoming earnings and reporting noting that the Co. is reportedly mulling mass job reductions. To the downside, Energy, Food, Beverage & Tobacco and Tech are the marginal underperformers. Philips (+11.7%) sits at the top of the Stoxx 600 post-Q1 results which saw the Co. exceed expectations for revenue and adj. EBITDA. Credit Suisse (+1.8%) shares are on the front foot post-earnings despite the Co. recording CHF 61bln of asset outflows in Q1 and CHF 67bln in deposit outflows which “have moderated but have not yet reversed”. Finally, Software AG (+49%) shares soared at the open after receiving an offer to be acquired by PE firm Silver Lake for EUR 30/shr (vs Friday's EUR 19.97 close).

24 Apr 2023 - 09:35- EquitiesResearch Sheet- Source: Newsquawk