EUROPEAN EQUITY UPDATE: Stocks mixed as regional indices remain guided by large-cap earnings

Analysis details (09:07)

• European equities (Stoxxx 600 -0.3%) are a mixed bag as the dust settles on yesterday’s ECB announcement which propelled stocks in the region higher as many desks took the view that the Bank may disappoint market bets looking for a September hike. In what has been a week otherwise dominated by a huge slate of corporate earnings with around 200 companies in the Stoxx 600 reporting results, the index is on track to close the week out with gains over just over 1% with discrepancies between regional bourses stemming from various heavyweight earnings releases. For today’s session, focus will also fall on regional inflation releases ahead of the EZ-wide metric due on Monday. Thus far, we have seen Y/Y CPI in France cool to 4.3% as expected, whilst Spain presented an upside surprise, printing at 2.3% Y/Y vs. Exp. 1.6% (prev. 1.9%); German-nationwide data is due for release at 13:00BST.


• Asia-Pac stocks traded mixed with the region cautious as all attention was on the BoJ policy decision in which the central bank kept monetary policy settings unchanged but announced to guide YCC more flexibly with fixed rate operations for 10yr JGB to be conducted at 1.0% (prev. 50bps). ASX 200 was pressured amid weakness in the property sector and miners, with sentiment also not helped by the surprise contraction in Retail Sales. Nikkei 225 underperformed with yields higher and markets spooked by the latest BoJ developments. Hang Seng and Shanghai Comp. shrugged off early weakness and gained after further calls and efforts for China to support the housing market and tech industry. In recent trade, Chinese market watchdog has reportedly asked brokers for advice to boost stocks suggesting brokers proposed stamp duty reduction, according to Bloomberg.


• US equity futures (ES +0.4%, NQ +0.7%, RTY +0.2%) are trading on the front foot, as positivity seemingly returns following a sell-off in stocks yesterday, after a slew of hot data prints. A fall in IJC to 221k (prev. 235k) and a significantly hotter GDP of 2.4% (prev. 1.7%) provided the markets with renewed fears of a more hawkish Fed in September. Though these prints are only the first of two months’ worth of activity data that the Fed assess following their summer break. Looking ahead, the markets will look towards more data including Employment Costs, PCE and Uni. of Michigan Inflation expectations. Additionally, traders will keep an eye out for some earnings from Chevron, Exxon Mobil, Aon, P&G and Colgate-Palmolive.


• In this week’s BofA flow show report, Stocks attracted USD 13.8bln inflows, bonds USD 11.0bln, whilst cash attracted USD 40.6bln. Looking at global trends, Europe and Japan saw outflows of USD 1.3bln and USD 0.1bln, whilst the US saw inflows resume at USD 9.9bln. Delving deeper into sectoral flows, Tech saw inflows of USD 0.1bln, whilst materials saw the largest inflow over the past 25 weeks. In terms of gauging sentiment, 5 out of 6 Bull & Bear indicator components are either signalling "bullish" sentiment or very close to it. 


• Equity sectors in Europe have a negative tilt with Real Estate and Travel & Leisure names lagging peers. Note, losses in the latter have been stemmed by earnings from British Airways owner IAG which reported better-than-expected earnings as quarterly profits beat analyst estimates by 40%. To the upside, Banks sit in marginal positive territory with Standard Chartered (+5.3%) a notable outperformer in the group after solid H1 results and announcing a USD 1bln buyback. Elsewhere, Natwest (unch.) shares are steady post-results in what has been a tumultuous week for the Co. after its CEO was forced to step down in wake of the Nigel Farage scandal; other banks having reported today include BBVA (-0.5%) and Caixabank (+1.1%). Other notable earnings include FTSE 100 heavyweight AstraZeneca (+3.8%) which is helping the index to stay afloat after beating on top and bottom lines, however, upside for the Healthcare sector overall has been capped by losses in Sanofi (-2.3%) after Q2 revenues fell short of analyst estimates. In the luxury sector, it has been a case of differing fortunes for Hermes (+2.2%) and Kering (-2.3%) with the latter hampered by disappointing Gucci sales.

28 Jul 2023 - 09:07- Fixed IncomeData- Source: Newsquawk