EUROPEAN EQUITY UPDATE: Stocks steady as earnings begin to ramp up in the region

Analysis details (09:25)

• European equities (Eurostoxx 50 -0.1%) trade with little in the way of firm direction with a lack of fresh incremental catalysts to inspire price action thus far. Overnight, Chinese GDP and activity data exceeded expectations, however, this is not having much impact on broader European trade thus far. Furthermore, there remains a lot of headline activity on the geopolitical front as US President Biden arrives in Israel with the aim of understanding how Israel plans to proceed going forward whilst making it clear that he does not want to see the conflict escalate. In a recent note, Goldman Sachs has suggested that eventually, the performance of equities could be impaired by growth concerns stemming from “a prolonged period of geopolitical uncertainty, coupled with a still inflationary macro environment”. As such, GS expects that any relief rally heading into year-end will be short-lived. Elsewhere, the main macro release for the morning has come via UK inflation metrics which leaned slightly firmer than expected (Y/Y CPI 6.1% vs. Exp. 6.0%) but are ultimately unlikely to dissuade the MPC from standing pat on rates once again next month.


• APAC stocks traded mixed following a similar performance on Wall St where the focus was on retail sales data, earnings releases and geopolitical headlines including a deadly strike at a Gaza hospital which both sides blamed each other for, while the region also digested the latest Chinese GDP and activity data which topped forecasts. ASX 200 (+0.3%) was positive as strength in healthcare, financials and the commodity-related sectors atoned for the losses in tech and utilities but with gains limited amid a higher yield environment. Nikkei 225 (+0.2%) was indecisive after a recent source report noted potential hawkish revisions to the BoJ’s Core CPI forecasts, while the rise in yields prompted an unscheduled purchase operation by the BoJ. Hang Seng (Unch.) and Shanghai Comp. (-0.8%) were varied despite better-than-expected Chinese GDP, Industrial Production and Retail Sales with several tech stocks hit after the US expanded chip restrictions and amid property sector woes as Country Garden is seen to likely have defaulted and with China property stocks gauge on course for its lowest since 2009.


• US equity futures are trading off neutral with the ES lingering below the 4400 mark following a mixed session yesterday. As the US day gets underway, traders will continue to monitor geopolitics, while there are also other key events to digest, including the weekly MBA mortgage applications, September Building Permits and Housing Starts, and weekly energy inventory data; the Fedspeak slate is also busy ahead of the blackout window which kicks in at the end of this week), with Governors Waller and Bowman (voters), NY Fed’s Williams (voter), and 2023 voters Cook and Harker due to give remarks. We will also get earnings reports from the likes of Netflix (NFLX), Tesla (TSLA), Morgan Stanley (MS), Abbott (ABT) and Procter & Gamble (PG) today.


• Equity sectors are mixed with outperformance in Telecoms with the sector boosted by better-than-expected earnings from Swedish listed Tele2 (+2.8%). Elsewhere, other gainers include Insurance and Retail names with the latter bolstered by post-earnings gains in Adidas (+4.4%) after the Co. reported stronger-than-expected Q3 earnings and raised guidance; Puma are up 3.4% in sympathy. To the downside, Real Estate names are the clear laggard with Barratt Developments (-2.8%) suffering after its latest trading update in which it noted that the trading environment remains difficult with potential homebuyers facing mortgage challenges. Nexi (+15.6%) is by far the best performing stock in the Stoxx 600 following reports that CVC is at the early stage of evaluating a potential offer for the Co. Just Eat Takeaway(+6.6%) shares are soaring after a solid Q3 update in which it raised guidance and announced a buyback of up to EUR 150mln, whilst Whitbread (+3.8%) shares are also enjoying a post-earnings bounce. On a less encouraging footing, ASML (which holds a 15.5% weighting in the AEX and an 8.2% weighting in the Euro Stoxx 50) shares are lower post-Q3 results which saw the Co. fall short on revenue and bookings metrics and note "Customers continue to be uncertain about the shape of the demand recovery in the industry. We therefore expect 2024 to be a transition year."

18 Oct 2023 - 09:25- EquitiesData- Source: Newsquawk