EUROPEAN EQUITY UPDATE: Stocks in Europe follow suit to gains on Wall St.

Analysis details (09:15)

• European equities (Eurostoxx 50 +0.8%) trade on the front foot following yesterday’s surge on Wall St with newsflow for the region otherwise light. In terms of the handover from the APAC region, stocks also took impetus from Wall Street, although gains were capped as participants digested soft data releases. Japanese stocks outperformed amid news of potential Japanese subsidies for chipmakers, whilst in China, the positive mood was capped by disappointing earnings from Tencent, as well as the news that Montana became the first US state to ban TikTok.


• US equity futures are a touch firmer in pre-market trade but ultimately continuing the sideways action seen since mid-April. While debt talks will continue to be in focus, traders will also be eying other key data releases with today’s weekly initial jobless initial claims data coinciding with the BLS survey window for the May jobs report. Elsewhere, the Philly Fed's manufacturing data follows a horrific report from the NY Fed on Monday. Earnings are due from Walmart (WMT), which traders will use to gauge the health of the consumer given other more mixed reports this week.


• Analysts at Citi highlight that Q1 earnings were solid for the Stoxx 600 and European earnings revisions look better than other major markets. However, Citi cautions that it does not think that recent EPS upgrades are sustainable given that earnings growth is decelerating and becoming narrower. Citi adds that “tighter credit conditions and an expected US recession should continue to weigh on EPS” and as such, it continues to expect a small earnings contraction this year followed by flat EPS in 2024.


• Equity sectors in Europe are mostly firmer with Autos and Parts top of the leaderboard; Volkswagen (+2.3%) is a notable gainer within the group following reporting in Handelsblatt that VW Brand is planning a EUR 3bln cost savings programme. Elsewhere, upside is observed in the Banks and Tech sectors, whilst Real Estate and Basic Resources lag. 


• In terms of individual movers, BT (-8.3%) is enduring a heavy session of losses after FY pretax profits fell short of estimates and the Co. announced it is to cut total staff to 75k-80k from 130k by 2028-2030. Burberry (-6.6%) is also suffering post-FY results with a 16% jump in Q4 sales in China not enough to keep shares afloat. On a more encouraging note, Aston Martin Lagonda (+13.5%) shares are markedly higher following a substantial investment in the Co. by Geely, which has committed GBP 234mln to become its third largest shareholder.

18 May 2023 - 09:15- Fixed IncomeResearch Sheet- Source: Newsquawk