LIVE MARKETS-Through the roof: Europe Q1 profits seen up 90%
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THROUGH THE ROOF: EUROPE Q1 PROFITS SEEN UP 90% (1017 GMT)
As around 230 STOXX 600 .STOXX companies have reported results, first quarter earnings are now expected to have increased 90.2% from Q1 last year, according to Refinitiv IBES latest data.
The revised growth estimates represent a dramatic increase in expectations. Exactly a month ago the earnings expectations growth was for 55.7% for the first quarter.
“Although equities have already performed strongly, this faster-than-anticipated earnings recovery supports further upside to equity markets," says Matthew Gilman, European Equity Sector Strategist at UBS Global Wealth Management.
UBS' new forecasts suggest equities will grow "relatively quickly into their current multiples,” he adds.
The good ride will continue in the second quarter, with earnings in companies part of the STOXX 600 index expected to increase 93.4%, from 83.1% forecast on April 13.
Consumer cyclicals have the highest earnings growth rate of any sector, and are seen recording a whopping 1210% increase in the quarter. It is expected to earn 9.3 billion euros in Q1 2021, compared to earnings of 700 million in the same period last year.
DIP BUYERS AT WORK (0815 GMT)
Sell-everything dominated traders' mindsets on Tuesday but looking at today's open in Europe it looks that dip buyers are already at work, trying to scoop up good companies at a bargain.
The idea that the Fed won't blink to what many see as a temporary flame up in inflation is certainly one reason to not be drawn into a too downbeat mood, even as today's U.S. CPI will most likely show a strong print.
"Soft or strong, inflation won't prevent the Fed from pumping more liquidity into the system in the foreseeable future," says Ipek Ozkardeskaya, analyst at Swissquote.
"Therefore, price pullbacks could be interesting dip buying opportunities for investors willing to benefit from a couple of more quarters of a positive market trend," she adds.
And Nigel Green, CEO of deVere Group, agrees, saying investors should be selective about the sell-off, especially when it comes to tech shares.
"This sell-off will used as a buying opportunity. Nobody seriously believes the future isn’t online," he writes.
And Jeroen Blokland, head of multi asset at Robeco, has asked his Twitter followers whether it's time to "Buy the dip?".
With 2,070 votes cast in and 12 hours left before the poll expires, 61.9% of respondents said "YES".
SWITCHING GEARS AT THE OPEN (0735 GMT)
European futures were pointing in the wrong direction for most of the pre-market fun but 20 minutes after the bell, most European benchmarks have made it to positive territory thanks to a good batch of earnings.
London's FTSE 100 .FTSE is leading the way, rising 0.6% with the help notably of Diageo which is visibly seducing investors with its decision to restart its capital return plan following a strong recovery led by North America.
The broader STOXX 600 .STOXX benchmark is gaining 0.4%.
In the banking sector, Commerzbank is enjoying a 6.9% jump as it beat expectations and raised its revenue outlook.
Less love, must be said, in the Netherlands for ABN Amro, falling over 6% after reporting a net loss due notably to a money laundering fine.
Another big loser was French video game editor Ubisoft which didn't convince with its trading update and lost 6%.
While this morning's news flow was positive enough to tilt the market upwards, the U.S. CPI will most likely determine the fate of this session.
INFLATION SHOWTIME (0707 GMT)
Global equity markets continue their retreat from the record highs reached at the beginning of the week.
With fiscal and monetary stimulus in full swing backing the economic recovery, there's no shortage of sell-side analysts pitching to buy the dip and ignore short-term inflation jitters.
But no matter how good today's batch of corporate results turns out to be, there's little chance investors will rush to drastically change the direction of travel before today's U.S. CPI.
The indicator is expected to show a 3.6% rise year-on-year and any sign inflation is getting out of the toothpaste tube faster than feared could knock equity risk premiums hard.
The yield on benchmark 10-year Treasuries US10YT=RR is currently at 1.62% but could test the 1.77% high seen at the end of March on strong data.
For many pundits, there's a fat risk that the "sell tech and growth" knee jerk reaction to inflation might morph into an ugly "sell everything" correction.
In the meantime there were no surprises from Germany's inflation data this morning (Full Story) and Britain's economy shone, growing a firm 2.1% in March from February. (Full Story) In China, vehicle sales rose 8.6% in April -- a 13th consecutive month of gains.
On the commodities front, oil prices edged up after a drop in U.S. crude inventories reinforced OPEC's robust demand outlook, while the market awaited fresh updates on the Colonial Pipeline outage.
In terms of corporate earnings, there's nothing to spoil the mood in the upbeat European banking scene with Germany's Commerzbank CBKG.DE swinging to a first quarter profit and Dutch bank ABN Amro
For emerging markets, Taiwan may take the spotlight. Its stock market slid more than 8%,set for their worst day in over 26 years as authorities mulled tighter restrictions to tackle a rise in domestic COVID-19 cases. (Full Story)
Key developments that should provide more direction to markets on Wednesday:
- Zurich Insurance posts a solid first quarter (Full Story)
- SoftBank reports a $37 bln profit at its Vision Fund unit (Full Story)
- U.S. 10-year Treasury auction
- Fed: Vice Chairman Richard Clarida, Philadelphia President Patrick Harker speak
- Bank of England Governor Andrew Bailey at ISDA event
FURTHER OFF RECORD HIGHS (0525 GMT)
European bourses are set to open lower today after their U.S. and Asian peers sustained heavy losses overnight as inflation fears took their toll across trading floors.
All in all though, global equities are not far off record highs, particularly on the old continent where the pan-European STOXX 600 is just about 10 points behind the 446.2 points reached on May 10.
There's also plenty of corporate earnings and indicators to help shape the session in Europe while traders wait for the very much awaited U.S. CPI.
It's likely many investors will want to get a glance on that one before buying the dip.