EUROPEAN EQUITY UPDATE: Stocks soft as earnings ramp up

Analysis details (09:29)

European equities (Eurostoxx 50 -0.7%) trade on the backfoot as earnings momentum in the region picks up and macro developments remain on the light side. APAC stocks were mostly lower after the mixed performance Stateside; conditions were also thinner than normal amid closures in Australia and New Zealand for ANZAC Day. US equity futures (ES -0.6%, NQ -0.6%, RTY -1.5%) are lower as the cautious setup continues into Tuesday. Today, the Richmond Fed manufacturing survey, and consumer confidence data will be closely watched while there are also a few housing-related releases on the docket too. However, perhaps the main focus will be on a heavy earnings slate, with numbers due from MSFT and GOOGL after the close; this comes ahead of numbers from META and INTC later this week - analysts note that the top 5 tech stocks have accounted for around two-thirds of the S&P 500 gains this year, underscoring the importance of the upcoming earnings at an index level. Other heavyweights that could offer macro insight today include DHR, PEP, UPS, GE, RTX, MCD, NEE, VZ, TXN, and V. Analysts at Citi state that even in the event that European GDP “outpaces the US, European equities/earnings will come under pressure”. Citi notes that “in the past three decades, Europe has never avoided an EPS contraction around a US EPS recession”, adding that “European earnings also remain more cyclical than their US peers, and the European index underperforms relative to the US during EPS contractions”. European equity sectors are mostly softer with Banks, Basic Resources and Real Estate names lagging peers. Of note for the former, UBS (-4.2%) is one of the worst performing stocks in the sector and weighing on peers (e.g. Credit Suisse -3.5%) following Q1 results which saw the Co. book an additional USD 665mln in provisions and report a 52% decline in quarterly income. Santander (-1.6%) is also lower post-results as the Spanish windfall tax weighed on earnings. More broadly for the sector, First Republic Bank earnings after-hours saw a beat on the bottom line but deposits fell by more than USD 100bln; FRC lower by 20% in pre-market trade. Despite the losses in Credit Suisse and UBS, the SMI (+0.1%) is the region’s marginal outperformer thanks to post-earnings gains in index heavyweights ABB (+3%), Novartis (+2.3%) and Nestle (+1.6%). Other notable updates have seen encouraging earnings from Whitbread (+4.1%) and Daimler Trucks (+2.3%), whilst Centrica (-2.9%) shares are on the backfoot after GS sold 150mln shares in the Co.

25 Apr 2023 - 09:29- EquitiesResearch Sheet- Source: Newsquawk