EUROPEAN EQUITY UPDATE: Stocks soft as European earnings take centre stage

Analysis details (09:25)

• European equities (Eurostoxx 50 -0.8%) trade lower across the board as the region follows suit to the afternoon losses in Wall Street and soft performance of APAC stocks overnight. Fresh incremental macro drivers for the region are lacking and as such, focus has fallen largely on a busy slate of corporate earnings. On which, the SMI (-1.8%) has been dragged lower by Roche (-4.5%) and Nestle (-2.3%) earnings with the Co.’s collectively accounting for around 35% of the index’s weighting. Of note for the latter, and what has been a key focus of analysts over the past few weeks, Nestle has stated that they have not seen any impact from weight-loss drugs on sales. From a sectoral standpoint, downside in Roche has prompted some underperformance for the health care sector, which has in part been cushioned by post-earnings gains in Merck AG (+4.5%) after the Co. announced it expects to return to growth in 2024. Elsewhere, Autos are on the backfoot with Renault (-7.1%) shares sharply lower after Q3 revenues fell short of analyst estimates. On a more positive footing, Tech is the clear outperformer and the only sector in the green following solid earnings from SAP (+4.7%) report stronger-than-expected Q3 EPS and adjusted EBIT metrics whilst reaffirming its outlook. Other post-earnings gainers include Telia (+10.3%), Sartorius (+8.3%), Pernod Ricard (+3.3%, whilst losers include Rentokil (-14.3%), Hargreaves Lansdown (-5.1%), Deutsche Boerse (-2.2%), Deliveroo (-1.7%) and Nokia (-1.7%) with the latter also announcing a 14k job reduction plan.


• APAC stocks were lower across the board amid spillover selling from global peers following the latest earnings releases and as geopolitical risks lingered, while further upside in yields also added to the headwinds. ASX 200 (-1.4%) was pressured amid mixed jobs data and with underperformance in yield-sensitive sectors. Nikkei 225 (-1.9%) suffered firm losses despite the mostly better-than-expected Japanese trade figures. Hang Seng (-2.7%) and Shanghai Comp. (-1.7%) conformed to the downbeat mood with the Hong Kong benchmark being the worst hit amid weakness in Chinese tech stocks and the property industry with the latter not helped by ongoing debt woes and after Chinese property prices remained at a contraction.


• US equity futures are lower with the NQ (-0.3%) now below the 15k mark; ES -0.4%, DJIA -0.3%, RTY -0.5%). Traders are keeping an eye on global earnings; after the US close, earnings from global bellwethers Tesla (TSLA) and Netflix (NFLX) were mixed, with Tesla sliding over 4% after disappointing results, while Netflix surged on a better-than-expected Q3. Today’s US earnings docket will also be noteworthy, with BX, T, PM, MMC, UNP, FCX, CSX and ISRG all scheduled to report. Traders will also be looking forward to Fed Chair Powell’s remarks, due from the Economic Club of New York, to see whether he too endorses the view put forward by some of his colleagues, like Vice Chair Jefferson, who have said that rising Treasury yields could steer the Fed away from further rate hikes.

19 Oct 2023 - 09:25- EquitiesResearch Sheet- Source: Newsquawk