Equity Brief: Earnings step over low expectations

European stock market sentiment builds strongly on Monday’s gains giving the DAX its best day since mid-June

Stock market snapshot as of [23/7/2019 2:50 PM]

  • European stock market sentiment builds strongly on Monday’s improvement with the best day for the Germany’s DAX, and the broad STOXX 600 since mid-June
  • They rose almost 2% and above 1% respectively earlier as the latest batch of earnings topped low expectations
  • Trading is also garnished by relief for the continent’s most battered sectors. There’s also speculation that reads better for Europe’s beleaguered banks, suggesting certain exemptions to deposit rates that will almost certainly turn more negative in coming months
  • Wall Street is also on the front foot after a solid session a day before. Again, a reasonable slate of earnings helps, as does sparse news on potential U.S.-China trade talks. Such indications as there are leave the door open for the resumption of high-level face-to-face negotiations in coming months

Corporate News

  • UBS and Santander underpin the bank sector with better than forecast quarterly net income. Their 1% and 3.3% respective stock price gains helped propel the key European bank index up 1.7% towards the U.S. open. That’s despite the Swiss lender’s crucial wealth business seeing outflows, prompting a warning about the global economy. It’s possible that caution may cap the sector rally into the close. Still, the Spanish group noted Americas as a bright spot, whilst confirming more sluggish going in Europe
  • Ams, a supplier of sensors to Apple, has its best day since October, rising 10% at one point after pacing profit expectations. Reaction weakened later after the highly-levered Swiss group reaffirmed interest in buying another Apple contractor, Osram, for €3.7bn, even though the German firm said it accepted a €3.4bn private equity offer
  • Germany’s Daimler and Continental, the latter a rival of auto parts maker Faurecia SA, gave Europe’s auto sector a break from the year’s malaise. China’s BAIC will buy a 5% stake in DAI. The German components group (whose shares are
  • down 30% this year) failed to surprise on the downside with a lowered outlook. Its French counterpart maintained 2019 guidance
  • The earnings cheer largely continues on Wall Street with Stanley Black & Decker, UTX, Coca Cola, Biogen and Lockheed Martin. KO: set for a firm session after topping estimates across key metrics; UTX crushed headline estimates, but mostly tilts higher on the latest in a string of guidance upgrades; biotech BIIB: profit surged 72%, enabling a 2019 upgrade; defence firm LMT: backlog ballooned to $137bn, up $3.5bn and it also raises profit expectations
  • Apple-Intel talks are being reported, as the iPhone maker seeks solutions for a gap in its modem offer (it hasn’t had a new one for years) and the chip maker has been vocal about exiting non-core businesses. INTC and AAPL rise a little, setting a backstop for the day for all three major U.S. index groups to build on


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