EUROPEAN EQUITY UPDATE: Stocks sluggish as Microsoft weighs on the NQ

Analysis details (09:38)

European equities (Eurostoxx 50 -0.3%) are a touch below the unchanged mark in what has been an uninspiring start to the session. German IFO data failed to inspire price action with the headline matching consensus following a beat on the expectations component and a miss on current conditions. The accompanying commentary noted that there probably will not be a recession in Germany but GDP will probably shrink slightly in Q1. The handover from APAC was a mixed one as the region digested firmer-than-expected CPI data from Australia and was subject to ongoing market closures. Stateside, US futures are lower (ES -0.5%, NQ -0.7%, RTY -0.3%), with the tech-heavy Nasdaq-100 leading the losses post-Microsoft. Microsoft reported after the bell and was initially buoyed following a beat on the bottom line and Cloud revenue but eventually slumped after it issued guidance on call; Texas Instruments’ outlook was also soft. Traders will continue to focus on earnings, with today’s docket packed, and will include updates from AT&T (T), Tesla (TSLA), IBM (IBM) and Abbott (ABT). Analysts at Barclays suggest that the upside in equities has been driven by systematic buying and HF short covering, which “may have legs” given that exposure is still below normal. Barclays adds that retail and long-only investors are selling US stocks to buy recession-proof bonds again, whilst “EM/China inflows are surging, but positioning on Europe is more cautious than sentiment suggests.” Sectors in Europe are mixed with Travel & Leisure top of the leaderboard following hefty post-earnings gains from easyJet (+10.2%) which have managed to lift the likes of RyanAir (+3.4%) and IAG (+2.2%). To the downside, Telecoms, Financial Services and Tech lag. Of note for the latter (in addition to Microsoft earnings), Eurostoxx 50 heavyweight (7.1% of the index) ASML (-1%) posted Q4 earnings in which the Co. beat forecasts for revenues and net profit but cautioned that “the Co. is seeing a lower demand in some areas as inventory for chips increases”. Finally, Rheinmetall (+2.3%) shares have been supported by reporting that Germany is to send Leopard tanks to Ukraine.

25 Jan 2023 - 09:38- Research Sheet- Source: Newsquawk

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