EUROPEAN EQUITY UPDATE: Stocks broadly higher ex-tech as TSMC chips away at semiconductor names

Analysis details (09:35)

• European equities (Stoxx 600 +0.2%) trade mostly higher with the exception of the Eurostoxx 50 (-0.1%) and AEX (-0.5%) which have been dragged lower by ASML (as well as ASM for the latter), which is trading lower by some 4% following earnings from semiconductor giant TSMC (see below for more details). In terms of macro updates for the region, things have been on the light side with participants beginning to look ahead to next week’s ECB announcement. A 25bps hike by the GC is widely baked in, however, any signalling about what comes thereafter remains subject to speculation. On which, this week saw comments from hawk-Knot of the Netherlands who refrained from putting a September hike firmly on the table and source reporting suggesting that communications over future action would likely be the biggest challenge for the Bank.


• Asia-Pac stocks traded mixed following on from the choppy performance stateside. ASX 200 (Unch.) was steady with the mining industry underpinned after BHP’s production update, while the latest jobs data topped forecasts but could also be seen as a double-edged sword with further scope for the central bank to hike rates. Nikkei 225 (-1.3%) was the worst performer after the latest trade data showed weaker-than-expected exports and a wider contraction of imports although the trade balance returned to a surplus for the first time in almost 2 years. Hang Seng (-0.3%) and Shanghai Comp. (-0.9%) were softer with Hong Kong initially lifted by early strength in the property sector, while the mainland was lacklustre after the central bank unsurprisingly maintained benchmark lending rates. Elsewhere, TSMC (TSM) profits fell by less than analysts feared, but its outlook was cautious, and it added that China's recovery was weaker than anticipated, while on AI, it said that demand was good, but not enough to offset weaker overall end-market demand.


• US equity index futures are around flat, but the Nasdaq-100 is in the red after downside in the share prices of Tesla (-4.2% pre-market) and Netflix (-7.5% pre-market), which both dropped after hours post-earnings. In terms of the takeaways from their respective earnings, Tesla fell after its CEO suggested further price cuts could be seen amid uncertain macro conditions, whilst Netflix shares were pressured as revenue missed expectations, though subscriber growth was solid. Elsewhere in the tech sector, IBM (-1.1% pre-market) fell after a revenue miss. Ahead, US data and earnings will continue to be in focus; weekly initial jobless claims data coincides with the BLS July jobs data survey window, while the Philly Fed manufacturing gauge will be eyed in the context of the better-than-expected NY Fed manufacturing survey earlier in the week. Today’s earnings slate includes BX, JNJ, MMC, PM, ABT, FCX, CSX, ISRG, SAP.


• Equity sectors in Europe have a mostly positive bias with Basic Resources top of the leaderboard with Anglo American (+5.2%) a standout gainer within the group following its Q2 production update in which it reported a 56% Y/Y increase in copper output. Real Estate names are showing another session of gains and following on from yesterday’s positivity which was spurred by the soft UK inflation report and subsequent rate repricing in the UK. Media names are also on the front foot amid post-earnings gains in Publicis (-3.8%). To the downside, Tech is the worst performing sector following the latest update from TSMC which has weighed on the likes of ASM International (-4.6%), ASML (-4.1%) and BE Semiconductor (-2.5%); also of note for the sector, earnings from SAP are due at 17:00BST. Finally, easyJet (-2.6%) is acting as a drag on the Travel & Leisure sector post-earnings despite reporting better-than-expected earnings with some attention placed on disruptions from forthcoming industrial action.

20 Jul 2023 - 09:35- EquitiesData- Source: Newsquawk