EUROPEAN EQUITY UPDATE: Stocks struggle to find their mojo

Analysis details (09:32)

• European equities (Eurostoxx 50 Unch.) predominantly trade a touch softer following the late dip on Wall Street yesterday and with fresh macro drivers for the region once again on the light side.


• Overnight, Asia-Pac stocks were mixed with the region cautious after the weak handover from the US; Nikkei 225 outperformed and climbed above the 30,000 level for the first time since September 2021.


• US equity futures (ES +0.3%, NQ +0.2%, RTY +0.4%) are marginally firmer but ultimately continuing the horizontal action that has been seen since April. Debt ceiling talks were being framed as constructive by officials, and while some pockets of progress were cited, the impasse remains. Upcoming data highlights include Building Permits & Housing Starts at 13:30BST, whilst the retail sector will remain in focus today with Target (TGT) and TJX Companies (TJX) earnings due in the pre-market.


• Analysts at Barclays suggest that following gains of 15% vs. the US over the past 8 months, the cyclical outlook for European equities is tricky and therefore is calling for a period of consolidation. From a strategic standpoint, Barclays thinks that diversification via European exposure remains wise given it is less concentrated and owned than the US with banks/periphery in better shape and a lower market beta; adds that the UK offers good quality and yield. HSBC notes that as the European Q1 earnings season comes to a close, EPS beats and surprise margins remain high relative to historical levels. HSBC adds that “though Q1 2023 EPS growth has improved; EPS growth forecast for 2023 as a whole is muted at just 1%”.


• Equity sectors in Europe are mostly negative with Financial Services bottom of the pile on account of losses in the LSE Group (-4.3%) after news that Blackstone and Thomson Reuters Corp. are part of a consortium selling GBP 2.4bln worth of stock in the Co.; stock offered represents a 5.1% stake. Furthermore, earnings from Euronext (-3.8%) are also acting as a drag on the sector and weighing on Deutsche Boerse (-3.4%).


• It’s been a busy session of corporate updates for Germany with heavyweight Siemens (+2.4%) top of the DAX 40 (+3.2%) following strong Q2 earnings and a guidance upgrade, whilst SAP (+1.5%) is another notable gainer after updating its guidance following the Qualtrics sale and announcing a EUR 5bln share buyback. On a less positive note, Commerzbank (-6.2%) shares are notably lower post-earnings with some desks noting that the Co.’s NII forecast fell short of estimates. Elsewhere in the banking sector, UBS (+0.2%) said it sees mark-down of USD 9.9bln in fair value adjustments on financial assets related to the Credit Suisse deal.

17 May 2023 - 09:32- Research Sheet- Source: Newsquawk