EUROPEAN EQUITY UPDATE: Stocks pressured with no clear driver

Analysis details (09:33)

• European equities (Eurostoxx 50 -0.5%) trade on the backfoot after a contained open gave way to selling pressure in early trade with no obvious catalyst behind the price action as fresh macro drivers remain light. The handover from the APAC region was a relatively flat one following similar price action on Wall St yesterday.


• US equity futures (ES -0.7%, NQ -1.0%, RTY -1%) trade lower with the downside coinciding with price action in European equities. The main after-hours mover was Tesla (-6.9% pre-market) amid margin concerns with CEO Musk taking the view that pushing for higher volumes and a larger fleet is the right choice here vs lower volume and higher margins. Fresh macro updates for the US are limited with attention ahead on Weekly initial jobless claims data which coincides with the survey window for the monthly US jobs data. Elsewhere, the April Philly Fed survey will help to shape expectations for the ISM data due early May, whilst Existing home sales for March are seen paring a touch vs Feb levels. Fed speak today includes, Waller (voter), Logan (voter), Bowman (voter), Mester (non-voter) and Bostic (non-voter). In the pre-market, earnings reports are due from BX, TSM, T, PM, AXP, UNP.


• Analysts at JP Morgan highlight that global earnings expectations are once again trending lower with 1-month net global EPS revisions falling to -15.1% from -7.2% last month. JPM adds that “the profit outlook seems to be weakening again, and we believe there is an increasing probability of further weakness during Q2”. From a regional standpoint, the largest net EPS upgrades are evident in Asia-Pac (ex-Japan), Europe is improving despite downgrades, whilst Japan, Global Emerging Markets, and the USA are all providing an accelerating pace of EPS downgrades.


• Equity sectors in Europe mostly lower with marked underperformance in Auto names amid post-earnings losses in Renault (-6.5%) as well as concerns that Tesla is focused on capturing market share from competitors and could see further price reductions in the EV space. Elsewhere, Basic Resource names are on the backfoot in-fitting with price action in underlying commodities, whilst to the upside, Real Estate, Banks and Insurance names gain with the latter bolstered by Direct Line (+1.2%) following a broker upgrade at Jefferies. Nokia (-2.8%) shares are on the backfoot after earnings fell short of expectations, whilst L’Oreal (+0.5%) have trimmed opening gains but remain firmer after encouraging sales figures and a confident outlook.

20 Apr 2023 - 09:33- EquitiesEU Research- Source: Newsquawk