EUROPEAN EQUITY UPDATE: Tentative gains for Europe as markets await the FOMC

Analysis details (09:44)

European equities (Eurostoxx 50 +0.5%) have kicked the session off on the front-foot in an attempt to claw back some of yesterday’s losses with not a great deal of change in the macro landscape since Tuesday’s close. That said, the region (particularly Germany) continues to be gripped by ongoing gas-supply angst in the wake of yesterday’s EU-wide gas usage agreement which saw source reports indicate that Russia will continue with its gas squeeze. The European session follows on from a mixed/contained APAC session with newsflow light as traders look ahead to Thursday’s call between US President Biden and Chinese President Xi which will cover a range of issues, including Taiwan, Ukraine and managing US-China competition. Stateside, US futures (ES +1%, NQ +1.9%, RTY +0.%) trade on a firmer footing than European peers with Alphabet shares (+4.5% pre-market) soaring after advertising topped forecasts, whilst Microsoft (+4.2%) initially fell on downbeat metrics but reversed course as markets welcomed its FY23 revenue guidance during the conference call. From a macro perspective, the main focus will be on today’s FOMC policy announcement with the Fed expected to come to market with a 75bps hike with traders looking to Chair Powell for guidance on whether the central bank signals similar moves ahead. The pre-market earnings slate sees reports from T-Mobile US, General Dynamics, Kraft Heinz and Boeing with Meta, Ford and Qualcomm due to report after-hours. Analysts at Barclays suggest that if positive momentum holds, CTAs and hedge funds could turn into buyers of equities whilst noting that retail and long-only funds remain overweight equities amid hopes for just a mild recession and a dovish Fed pivot. Back to Europe in what has been an exceptionally busy morning of earnings, sectors are mostly firmer with outperformance in the Personal Care Drug and Grocery Store index amid post-earnings upside from Reckitt Benckiser (+4.9%) with the Co. also raising guidance. Tech names also outpace peers, in-fitting with performance Stateside whilst Travel & Leisure and Construction are also on a firmer footing. To the downside, Real Estate and Telecom names lag. In terms of individual movers, standout post-earnings gainers include Atos (+6.3%), UniCredit (+6.3%), Holcim (+4.8%), Lloyds (+3.7%) and Credit Suisse (+1.5%) with the latter’s larger-than-expected Q2 loss accompanied by the Co. naming a new CEO. Laggards include Michelin (-5.3%), Adidas (-4.4%/also cut guidance), Deutsche Bank (-3.7%), Rio Tinto (-2.9%) and Telefonica Deutschland (-2.1%).

27 Jul 2022 - 09:44- Fixed IncomeEconomic Commentary- Source: Newsquawk