EUROPEAN EQUITY UPDATE: Stocks supported amid a deluge of earnings, all eyes now on Frankfurt

Analysis details (09:30)

• European equities (Eurostoxx 50 +0.9%) trade higher across the board in what has been an exceptionally busy morning of corporate earnings for the region. From a macro perspective, as the dust settles on yesterday’s FOMC rate hike, which many believe to be the last of the current cycle, attention turns to Frankfurt whereby the ECB are expected to follow suit with a 25bps increase in rates. With such a move so widely telegraphed by the Bank, attention will turn to what guidance, if any, the Bank provides on tightening ambitions beyond July. That said, it is expected that Lagarde will refrain from providing much in the way of clues on this front and will likely stress the Bank’s data dependence given that come September, policymakers will have seen the release of July and August inflation reports and will be armed with the latest macro projections. 


• APAC stocks traded higher in the aftermath of the FOMC meeting. ASX 200 was led by strength in real estate and tech, while participants also digested production updates. Nikkei 225 was initially hesitant amid a firmer currency and as the BoJ kick-started its 2-day policy meeting but eventually conformed to the rally. KOSPI gained the spotlight on earnings including Samsung Electronics which topped estimates. Hang Seng was positive with outperformance in Hong Kong despite the HKMA’s lockstep rate, as sentiment benefitted from recent support efforts and with the tech and auto industries lifted after China issued guidelines on the standardisation of intelligent connected vehicles and with regulators holding talks with major ride-hailing firms. Furthermore, XPeng shares surged over 30% in early trade after Volkswagen took about a 5% stake in the Co. and plans to jointly develop two electric models for the mid-size segment.


• US equity futures (ES +0.5%, NQ +1.1%, RTY +0.2%) are extending gains following a slew of post-market earnings, with notable results from eBay and Meta, in which the latter reported a beat on their results, with shares seen higher by 6% in pre-market trade. Matching expectations the Fed announced a 25bps hike, with Fed Chairman Powell tight-lipped on any future monetary policy decisions. He added that though the softer June CPI report was welcome, it was only for one month. In terms of what’s next for the FOMC, Powell commented that, if possible, the Fed could hike in September if the data warrants it. The holiday break will allow members to digest two CPI reports and a slew of activity data to make a more informed decision. Looking ahead, the markets will welcome another busy day of earnings with focus on McDonalds, Ford, Abbvie, Mastercard and Intel. Traders will also await a slew of Tier 1 US data, including PCE Advance, GDP, IJC and Durable Goods. These will be the first releases post-FOMC announcement and will give an insight into the health of the economy, with PCE and GDP expected to cool from the prior. 


• Equity sectors in Europe are mostly firmer with Media names the standout outperformer thanks to post-earnings gains in Relx (+3.6%) and Universal Music Group (+10.6%) who account for around 42% of the Stoxx Europe 600 Media Index. Elsewhere, Tech names are on the front-foot amid broad-based gains in the sector and earnings from Samsung which saw the Co. provide bullish commentary for the AI sector and results from STMicroelectronics (+0.8%) which posted higher sales underpinned by solid automotive demand. Construction and Materials is another source of positivity for the region with Saint Gobain and Holcim (accounting for around 17.5% of the Stoxx Europe 600 Construction & Materials Index) shares up 4.5% and 2.4% respectively post-results. To the downside, Energy names are the standout laggards despite firmer crude prices as earnings from TotalEnergies (-0.4%) and Shell (-2.1%) drag the sector lower with the former highlighting a softening oil and gas environment and the latter reporting softer-than-expected profits. Of note for the auto sector, today’s corporate earnings have seen Volkswagen (-4.3%) confirm its FY view, but lower its delivery outlook, Mercedes (+0.6%), reported a surge in profits and lift guidance, whilst a beat on net income was not enough to keep Renault (-1.3%) afloat. For the banking sector, Barclays (-5.6%) shares have been pressured after soft Q2 results, whilst BNP Paribas (+3.9%) shares were bolstered by a beat on Q2 net income and have helped support the CAC 40 (+1.1%) which has seen gains capped by disappointing earnings from Airbus (-1.8%).

27 Jul 2023 - 09:30- Fixed IncomeData- Source: Newsquawk