EUROPEAN EQUITY UPDATE: Stocks nurse earlier losses with earnings regaining focus for now

Analysis details (10:09)

Major bourses in Europe are nursing some of the Fed-inflicted wounds with the overall picture now mixed (Euro Stoxx 50 -0.3%; Stoxx 600 -0.1%) after global equities sold off in anticipation of incoming central bank tightening, whilst earnings from both sides of the pond pick up the pace. US equity futures are now mostly positive with the tech-laden NQ (+0.4%) narrowly outpacing the ES (+0.1%), YM (+0.1%) and RTY (-0.2%) ahead of Apple’s earnings after-market, whilst Tesla (-0.5%) is lower pre-market despite respectable beats on top and bottom lines, with the chip-shortage and lack of progress on models/releases also bringing the company’s future valuation into focus in what is poised to be a crowded market. In terms of outlooks for equities, Ray Dalio’s Bridgewater Associates see an S&P 500 fall of up to 20% “before the Fed blinks”, whilst BlackRock Investment Institute does not plan on buying the dip amid central bank and geopolitical uncertainty. Back to Europe, the Fed fallout sees Financials the clear outperforming sector, and thus lifts the UK’s FTSE 100 (+0.4%), Italy’s FTSE MIB (+0.4%) and Spain’s IBEX (+0.6%) due to their heavy exposures to the sector – whilst Deutsche Bank (+5.2%) also resides among the top Stoxx 600 gainers post-earnings. Conversely, the DAX 40 (-0.5%) sits as one of the laggards as index-giant SAP (-6.0%) slips despite strong numbers, with tech valuations under scrutiny in a tightening environment. Overall, sectors do not offer a particular theme, but financials, oil, and basic resources are the top beneficiaries as things stand, with the latter two aided by elevated prices and with more desks calling for exposure to “real assets” in times of uncertainty. In terms of individual movers, Siemens Gamesa (+6.5%) stands at the top of the Stoxx 600 after reports suggested Siemens Energy (+1.3%) has reportedly increased its efforts to explore a full integration of wind turbine business Siemens Gamesa. Leonardo (+2.1%) is firmer after sources suggested the Co. could be mulling a divestment of its communications unit which could be valued between USD 300-400mln. Phillps (-2.2%) is pressured after the US FDA stated that an expanded recall of certain ventilators by Philips late last year as Class 1 (the most serious type), saying they could lead to injuries or death. Meanwhile, earnings-related movers include STMicroelectronics (+5.5%), Software AG (+5.2%), easyJet (+1.4%), Elior (-11.5%), Diageo (+0.3%)

27 Jan 2022 - 10:09- EquitiesEconomic Commentary- Source: Newsquawk