EUROPEAN EQUITY UPDATE: Softer trade across stocks while Snap and Twitter sink pre-market

Analysis details (09:59)

Cash bourses in Europe started the session with losses which then extended to the downside as market sentiment further deteriorated despite a lack of fresh catalysts, following a mostly lower APAC lead and a downbeat session on Wall Street yesterday. US equity futures are also softer across the board with the NQ (-0.9%) lagging its peers (ES -0.6%, RTY -0.5%, YM -0.4%) as bond yields continue to climb, whilst Snap (-25% pre-market) and Twitter (-11.5% pre-market) plumb the depths pre-market – the former post-earnings, and the latter on reports that Biden officials are discussing whether to subject Elon Musk’s ventures to national security reviews, including the deal for Twitter and Starlink. As Q3 earnings season gets underway in both Europe and the US, analysts at Barclays suggest margin contraction is potentially higher than initially thought, particularly in Europe, but sales growth is ahead of earnings growth in both regions - “Europe EPS growth y/y is coming at 3.4%, 7% above consensus, while US is at -4.4%, 4% above consensus; Sales growth is 20% in Europe, 6% in US… earnings beats are running ahead of the long-term average in both regions, while sales beats are stronger in Europe given FX tailwind”, the strategists say. Back in Europe, cash bourses trade with varying degrees of losses (Euro Stoxx 50 -1.6%; Stoxx 600 -1.2%), with the UK’s FTSE 100 (-0.7%) cushioned as exporters cheer a weaker Sterling. Sectors in Europe are in a sea of red, but defensive sectors are faring better than cyclical peers at the time of writing, with Healthcare, Food & Beverages, Optimised Personal Goods, and Telecoms towards the top of the bunch, whilst Retail, Consumer Products, Construction, Real Estate, Financials, and Basic Resources reside on the other end of the spectrum. Retail is hit by Adidas’ (-8.8%) FY guidance cut – with peers JD Sports Fashion (-6.3%) and Puma (-5.7%) lower in sympathy. Consumer Products are pressured by L’Oreal (-4.5%) and Kering (-4.4%) post-earnings. Other earnings-related movers include Deliveroo (+3.2%), IHG (-4.2%), EssilorLuxottica (-2.8%), Renault (-2.3%), Vivendi (-3.7%), Telia (-7.5%), and PostNL (-10.0%), with the latter dragging down postal peers after cutting guidance (Deutsche Post -3.2%, Post Italiane -1.9%, Austrian Post -1.6%, Royal Mail/International Distributions Services -5.3%). Away from earnings, SAP (+0.3%) is the only stock in the DAX 40 in the green amid a broker upgraded at JP Morgan and tailwinds from competitor Oracle (+0.7% pre-market) targeting annual revenue of USD 65bln by 2026 with an operating margin of 45% including Cerner, according to comments at Oracle’s analyst day.

21 Oct 2022 - 10:03- Research Sheet- Source: Newsquawk