EUROPEAN EQUITY UPDATE: Stocks benefit from post-FOMC tailwinds ahead of ECB and BoE

Analysis details (09:35)

European equities (Eurostoxx 50 +1.2%) are benefiting from the post-FOMC tailwinds, which also proved to be supportive for the APAC region overnight. It’s been a very busy morning of earnings for Europe whilst macro focus for the region firmly placed on events at the BoE and ECB with both banks set to pull the trigger on a 50bps hike and the latter expected to be more forceful than the former in stressing its hiking intentions (full previews of both events can be found in the research suite of the website). US equity futures are mixed, with the ES (+0.4%), RTY (-0.1%) and YM (-0.2%) all near neutral levels, although the NDX (+1.3%) outperforms after Meta Platforms surged over 20% following its earnings (it has a weight of around 1% in the index, but is a bellwether for other tech/communications names). Earnings will remain in full focus for today’s session with a particularly busy after-hours reporting schedule which includes Amazon, Alphabet, Apple, Qualcomm, Ford, Starbucks and Gilead Sciences. Analysts at Goldman Sachs suggest that Europe’s outperformance vs. the US' still has further room to run with stocks in the region supported by “more attractive valuations and improved relative fundamentals, including a shift towards Value”. GS adds that “when the US equity market has a meaningful correction there is no safe place to hide within equities. Whereas, in environments of a relatively flat US equity market, European equities can outperform”. Sectors in Europe are skewed mostly firmer with outperformance in Tech names following a strong showing for the European chip sector post-Infineon (+6.3%) earnings which has also helped prop up peers. To the downside, Banking names are lagging following disappointing earnings from Deutsche Bank (-3.7%), ING (-5.3%) and Danske Bank (-2.8%) with the former posting a miss on Q4 profits; Santander (+4%) has managed to provide the sector with some reprieve post-results. Elsewhere, earnings highlights for the FTSE 100 have included BT (+3.8%) and Shell (+1.8%) with upside for the latter capped by reports that the Co. could have to pay compensation and undertake the largest ever terrestrial oil clean-up following legal action in the Niger Delta. Finally, Telecom Italia (+8.9%) is top of the Stoxx 600 following news that KKR has offered to purchase a stake in the Co.’s fixed-line business.

02 Feb 2023 - 09:35- Research Sheet- Source: Newsquawk