EUROPEAN EQUITY UPDATE: Stocks softer as large caps weigh on sentiment

Analysis details (09:42)

European equities (Eurostoxx 50 -0.9%, Stoxx 600 -0.8%) are trading on the backfoot following further disappointing large cap US earnings and a soft APAC handover. Chinese equities were notably lower with particular softness in the Hang Seng Index after the NY Times reported that the Biden administration is weighing further controls on Chinese technology. From a macro perspective in Europe, it is very much a case of the morning after the night before with speakers from the ECB trying to walk back some of the dovish takeaways from yesterday’s announcement with perhaps the most explicit of those being Slovakia’s Kazmir who said rates will rise in December and in early 2023, crossing neutral like a 'runaway train'. As it stands, despite today’s downside, the Stoxx 600 is on course to close the week out with gains of around 2.1%. Stateside, US index futures are trading with losses between 0.6% and 1.5%, with the tech-heavy Nasdaq-100 lagging; Amazon is down over 12% (it has a weighting around 7% in the index); gains in Apple (weighted at just under 14% of the index) and Intel (weighted at around 1% of the index) are not enough to offset the pressure in Amazon. US PCE data is due for release later today (the Q3 GDP report released Thursday provided some signs that PCE inflation may be cooling); that said, while the street looks for US core PCE to rise at a slightly slower rate in September (0.5% M/M expected after the 0.6% in August), the annual rate of core PCE is expected to tick up to 5.2% Y/Y from 4.9%, which may be enough to dash some of the nascent hopes that the Fed will pivot towards a smaller increment of rate hikes next week. Today's US earnings docket includes CVX, XOM, NEE, ABBV. Sectors in Europe are mostly softer in what has been another busy morning of earnings reports. Basic Resource names underperform alongside performance of underlying commodity prices and after Glencore (-2.3%) lowered FY22 production guidance for some commodities. Elsewhere, Tech names are softer following on from yesterday’s underperformance as US large cap earnings continue to underwhelm. For the Banking sector, earnings from Natwest (-8%) and BBVA (-3.2%) disappointed with the former providing a gloomy outlook for the UK. Elsewhere, Danone (+2.2%) is the best performer in the CAC after raising its 2022 outlook alongside Q3 results. Finally, Volkswagen (-2.9%) are lower on the session with Q3 earnings impacted by a non-cash impairment loss of 1.9bln following the write down of ARGO AI investment.

28 Oct 2022 - 09:42- Research Sheet- Source: Newsquawk