European Midday Briefing : Bumper Nvidia Results Spur Fresh Record Highs in Europe

MARKET WRAPS

Stocks:

The Stoxx Europe 600 hit a record high on Thursday after bumper results from Nvidia boosted global stock markets.

The DAX and CAC-40 also hit fresh highs, but the FTSE 100--which has consistently trailed European peers recently--underperformed again, as banking stocks fell.

Traders shrugged off Federal Reserve minutes showing policymakers want to avoid cutting interest rates too early.

U.S. Markets:

Stock futures were surging, led by technology shares, following Nvidia's earnings, with the AI giant's stock up more than 12% in premarket trading.

Other semiconductor stocks were rallying following Nvidia's report. Super Micro Computer jumped 13%, Arm Holdings rose 9.9%, and Broadcom was up 4.4%.

Forex:

A boost to equities sent the dollar to its lowest level in 20 days against a basket of currencies, overriding cautious Fed minutes.

"I am not surprised that the Fed members won't rush toward the exit, but I am surprised that the dollar bulls are hard to bring on board," Swissquote said.

UniCredit Research said EUR/USD will probably continue to struggle above 1.08 without re-approaching 1.09, although a negative surprise from the Eurozone purchasing managers surveys probably won't drag the currency pair below 1.0750.

UniCredit Research said the surveys for the eurozone, U.K. and U.S. might prove a good test to evaluate the ability of many major currencies to gain ground against the dollar.

"Investors have already partly trimmed their positions, as reflected in the slide of the U.S. dollar index below 104," it said.

Bonds:

The Italian BTP-German Bund yield spread is trading around 150 basis points, 15bps below its 10-year average, Saxo said, adding it was important since the widening beyond 200bps has been an undesired event in the past.

Saxo said the good news was that at the current BTP-Bund spread level, the European Central Bank has plenty of room to wait to declare victory over inflation and to continue to reduce its balance sheet gradually.

Energy:

Oil prices were slightly firmer supported by a weakening dollar and heightened tensions in the Middle East.

Meanwhile, according to reports, data from the API showed U.S. crude stockpiles increased last week but demand prospects are improving as refineries try to return to service after outages. Official inventory data from the EIA is due later on Thursday.

Metals:

Base metal prices were up with gold holding onto consecutive gains, as the Fed minutes offered guidance on when the bank may pivot toward monetary easing, MUFG said.

Elsewhere, China-sensitive base metals remain down year-to-date, although the larger-than-expected cut to the loan prime rate this week could signal that Chinese authorities are still focused on supporting growth conditions this year, MUFG added.

If reinforced by further policy easing measures, this could provide upside risk to 2024 demand, MUFG said.

EMEA HEADLINES

Eurozone Draws Closer to Economic Recovery, PMIs Show

The eurozone continued to climb out of its economic downturn this month, fuelled by a resurgent services sector, according to a purchasing managers' survey published Thursday.

The HCOB Flash Eurozone Composite PMI Output Index-a gauge of activity in the manufacturing and services sectors-rose to 48.9 in February from 47.9 in January, marking the slowest rate of downturn in eight months. Economists polled by The Wall Street Journal had expected a slighter increase to 48.5.

Nestle Warns on Sales Growth Slowdown as Shoppers Tighten Belts Amid Price Rises

Nestle cautioned that sales growth will moderate this year as higher prices force shoppers to ease spending, after full-year earnings and sales came in just shy of expectations.

The Swiss maker of KitKat chocolate bars and Nescafe coffee said Thursday that it expects organic sales to climb by around 4% this year, slowing from 7.2% growth in 2023 and below expectations of 4.7%, according to a consensus forecast provided by the company.

Mercedes-Benz Expects Lower Earnings But Lifts Dividend

Mercedes-Benz Group raised its dividend despite posting a decline for fourth-quarter sales and net profit, and forecast lower earnings this year on geopolitical and macroeconomic uncertainty.

The German luxury-car maker said Thursday that net profit slipped 21.5% on year to 3.16 billion euros ($3.42 billion), as inflation and supply-chain costs pressured the company's bottom line. Analysts expected net profit to finish the quarter at EUR2.80 billion, according to Visible Alpha.

Anglo American Cuts Dividend After Profit Plunged on Impairments, Commodity Price Weakness

Anglo American's trimmed its dividend after full-year profit declined more than expected and it booked $2.1 billion in impairments as it grapples with weak commodity markets across its portfolio.

The multinational, diversified miner said Thursday that its net profit for 2023 dropped 94% to $283 million on year due to impairments from its diamond and nickel businesses and lower prices for platinum and diamonds.

Danone 2023 Profit Fell; 2024 Guidance in Line With Midterm Targets

Danone reported a fall in full-year profit and sales, while saying guidance for 2024 remains in line with its midterm targets.

The French food company said Thursday that 2023 net profit was 881 million euros ($953.1 million) compared with EUR959 million in the previous year. Recurring net income, which excludes exceptional items, was EUR2.28 billion, up 3.5% compared with the same period a year earlier.

Axa Issues Targets After Rise in Net Profit

Axa launched new key financial targets for 2024-26 alongside a share buyback and raised its dividend on increased full-year net profit, boosted by higher underlying earnings and net realized capital gains.

The French insurer said Thursday that it now guides for an underlying earnings per share compounded annual growth rate between 6% and 8%, underlying return on equity between 14% and 16% and more than EUR21 billion in cumulative organic cash upstream in 2024 to 2026. Axa said it delivered on four of its financial targets for 2020-2023, out of which it exceeded in three.

Lloyds Banking Puts Aside GBP450 Million For Motor Finance Regulator Review

Lloyds Banking Group booked a 450 million pound ($568.7 million) provision for the potential impact of the U.K.'s financial regulator's review into the motor finance industry, the British lender said as it launched a GBP2.0 billion share buyback program and posted better-than-expected profit for the fourth quarter of 2023.

The British lender put the money aside in view of the Financial Conduct Authority's investigation into historical car finance discretionary commission arrangements, to which the bank is exposed to through its Black Horse brand, which is the U.K.'s largest motor finance provider.

Rolls-Royce Swings to Pretax Profit on Surging Revenue, Cost Savings

Rolls-Royce Holdings said it swung to a pretax profit, boosted by cost savings and revenue that surged ahead of expectations.

The U.K. aerospace and defense company posted a pretax profit of 2.43 billion pounds ($3.07 billion) for 2023 compared with a pretax loss of GBP1.50 billion the year before.

Knorr-Bremse Shares Jump After Results Beat Views

Knorr-Bremse shares traded higher after the company reported better-than-anticipated results and issued guidance that analysts saw as ahead of consensus expectations.

At 0856 GMT on Thursday, shares in Knorr-Bremse were up 6.7% at EUR62.44, making up for losses earlier this year and taking the stock's year-to-date gain to 6.2%.

Telefonica Swings to Net Loss on One-Off Charges

Telefonica reported a swing to a net loss for the fourth quarter due to one-off charges at its Spanish business and U.K. joint venture, but forecast higher revenue and earnings this year.

The Spanish telecommunications group on Thursday posted a net loss of 2.15 billion euros ($2.33 billion) for the fourth quarter, which it attributed to a provision for layoffs in Spain and an impairment charge on its U.K. joint venture Virgin Media-O2. For the year-earlier period, the company made a profit of EUR525 million.

WPP Pretax Profit Falls on Impairments

WPP reported a fall in pretax profit for 2023 after booking a large impairment, but said that its AI-powered platform WPP Open is rapidly growing its number of customers.

The AI tool is now being used by more than 30,000 people across the group, the company said, adding that it continues to invest in AI opportunities, as outlined in its recent capital markets day.

Germany's Economy Is Stuck. But Stocks Are Looking Cheap.

German stocks have stalled this year after a decent 2023. The Global X DAX Germany exchange-traded fund has gained less than 1% year to date, while the S&P 500 index jumped another 5%.

No wonder. Europe's biggest economy shrank last year, and the Bundesbank just predicted more of the same for the first quarter.

Why Arm, Birkenstock, and Other European Firms Are Listing Their Stock in the U.S.

The U.S. is pulling in more companies from Europe looking to sell their shares.

The latest company to jump the Atlantic was the U.K.'s Flutter Entertainment, the parent of sports betting company FanDuel, among others. Flutter made its debut as a secondary listing in New York on Jan. 29 and immediately said it wanted to make that its primary listing.

GLOBAL NEWS

A Banking Crisis Could Be Closer Than You Think

It's premature to feel relief as we approach the first anniversary of Silicon Valley Bank's collapse.

The Pollyannas on Wall Street disagree, pointing out that the banking system has avoided the systemic crisis that seemed all too possible this time a year ago.

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02-22-24 0518ET