EUROPEAN EQUITY UPDATE: Mixed and tentative mid-week trade across stocks awaiting the US entrance

Analysis details (10:27)

Equities in Europe now trade mixed in contained ranges following an hour of subdued trade after the cash open. The mixed sentiment reverberated from the APAC region after Wall Street ultimately finished lower following hawkish Fed rhetoric. Markets are juggling several risk factors – most recently the China-Taiwan tensions, whilst Russia-Ukraine sees no signs of peace progress. Elsewhere, slowing growth, mixed earnings, and data-driven volatility remain on investors’ minds. Analysts at RBC suggest that Q2 earnings in the US have been better than feared, but “that raises the risk of a selloff in stocks from the possibility of further downward revisions in the second half of the year”, with the desk warning that recent rallies are “fragile”. From a sectoral standpoint, the analysts note that Tech has one of the highest beat rates thus far, whilst it also has one of the “highest percentages of negative revisions on both earnings and sales.” Elsewhere, Barclays weighs in on European equities, suggesting that “Peaking inflation, lower yields, cautious systematic positioning, light summer volumes and bears’ fatigue could give legs to the short squeeze” but the desk “would fade the rally as emerging Goldilocks narrative feels misplaced.” Barclays adds that Q2 earnings provide little comfort as guidance remains mixed and margins narrow. “Equity valuations are not that cheap and potential for re-rating looks limited”, Barclays says. Back to today’s session, bourses are varied with sectors also mixed and most in narrow ranges. Travel & Leisure and Tech lead the gains with the latter propped up by Infineon (+2.3%) post-earning after revenue and margin beats – with European peers ASML (+0.8%) and STMicroelectronics (+0.4%) supported in tandem, whilst US-listed peer AMD sheds over 5% in the pre-market after downbeat earnings. Autos are pressured by BMW (-5.4%) despite beating expectations as the DAX constituent warned of a challenging H2. In financials, French bank SocGen (+4.1%) is higher after posting a smaller-than-expected loss whilst beating forecasts on FIC and Global Markets revenues. On that note Commerzbank (+1.0%) also sees gains after beating on revenue and net income expectations. Finally, in M&A, Tod’s (+20%) soars after the Co. has announced a voluntary offer for the Co. from Deva Finance at EUR 40/shr (vs Tuesday’s close of EUR 33.42). Avast (+40%) sits at the top of the Stoxx 600 after the UK CMA provisionally cleared NortonLifeLock / Avast merger.

03 Aug 2022 - 10:26- Research Sheet- Source: Newsquawk