EUROPEAN EQUITY UPDATE: Stocks steady whilst tech gets SAPped

Analysis details (09:30)

• European equities (Stoxx 600 flat) trade with little in the way of firm direction with discrepancies between some indices a by-product of corporate earnings and broader sector plays. The Stoxx 600 is on track to close the week out with gains of around 0.8% ahead of next week’s busy slate of corporate earnings where over 200 companies within the index are due. From a macro perspective, focus will be on the ECB with the central bank expected to deliver a widely-flagged 25bps rate hike with greater interest placed on any guidance or hints over how the balance of views on the GC lies on tightening beyond July.


• Asia-Pac stocks were mixed as further support efforts from China partially offset the negative handover from Wall St. ASX 200 (-0.2%) was subdued amid weakness in tech, financials and the mining-related sectors. Nikkei 225 (-0.5%) slumped at the open with participants then digesting somewhat ambiguous CPI data which printed mostly in line with expectations but showed a slight acceleration for the headline and core inflation. Hang Seng (+0.6%) and Shanghai Comp. (-0.1%) kept afloat with sentiment helped by further supportive efforts from China in which the NDRC released policies to boost electronics products consumption and measures to promote automobile consumption.


• US equity futures (ES +0.2%, NQ +0.4%, RTY +0.2%) are posting modest gains after yesterday’s mostly soft close which saw the Nasdaq 100 post its second worst day of the year as poor earnings receptions for NFLX and TSLA catalysed a sharp pullback. Analysts at Barclays note that the dominance of tech names has been the main driver behind the grind higher in equities YTD and are of the view that the market is “unlikely to see a respite from such narrow leadership without fundamental catalysts”. Looking ahead from a US perspective, the macro calendar is light and therefore focus will remain on the corporate earnings slate which includes the likes of SLB, ROP and AXP in the pre-market whereby the latter will be used as a proxy for the health of the US consumer.


• Equity sectors in Europe are a mixed bag with Media and Energy names top of the leaderboard as the latter is underpinned by upside in underlying crude prices. To the downside, Basic Resource (Norsk Hydro -2.8%) and Tech names lag with the latter weighed on by losses in SAP (-5.1%) which is also acting as a drag on the DAX 40 (-0.5%). Earnings from SAP saw the Co. miss on top and bottom lines for Q2 but note that demand remains strong for H2. Elsewhere, well-received earnings updates include the likes of Schindler Holdings (+5.3%), Ubisoft (+4.3%), Sartorius (+3.2%) and Danske Bank (+1.8%). To the downside, earnings have acted as a drag on the likes of Lonza (-8.9%), Dassault Aviation (-7.9%), Stora Enso (-6.5%) and Thales (-4.0%).

21 Jul 2023 - 09:30- EquitiesEU Research- Source: Newsquawk