[MARKET ANALYSIS] European bourses higher on a busy day of earnings; US equity futures indicated higher despite contrasting META and MSFT earnings
- European bourses trade entirely in the green following a busy morning of earnings (see more below) and constructive rhetoric by the Pakistani Foreign Ministry. Al Jazeera reported comments by the spokesperson stating that discussions between Tehran and Washington are ongoing regarding the situation in the Strait of Hormuz and de-escalation; this spurred broader risk-on, with yields also falling as crude benchmarks pulled back. On the data front, flash GDP figures across the EZ came in broadly stronger than expected (outside of France); however, Spanish inflation came in hotter than expected, with German state CPIs also rising Y/Y.
- Sectors highlight the positive bias. Construction tops the pile, with Chemicals and Basic Resources rounding out the sector outperformers. Health Care, Financial Services and Telecoms are the only sectors in the red.
- A typical busy Thursday of earnings, with L'Oreal, Adidas and Stellantis in focus. L'Oreal LFL sales beat estimates, and it announced a 50-year exclusive deal with Kering. Adidas Q2 operating profit missed estimates while its H1 gross margin ticked lower. The Co. highlighted higher US tariffs and unfavourable currency developments as key reasons for the softer figures. In other news, Adidas' Board appointed a new CFO. Finally, for Stellantis, its H1 adj. operating profit missed estimates while analysts at Bernstein also highlighted that margins for both Europe and North America missed.
- Other market-moving earnings include: Rolls-Royce, H1 metrics beat estimates and notes further confidence in mid-term guidance; Rentokil, after it highlights struggles in North America (accounts for 59% of total revenue); Schneider Electric, Q2 revenue beat estimates and raises its FY26 guidance.
- US equity futures are higher; however, there are some big pre-market movers following earnings after-hours. Positively, Microsoft prints gains of over 8% pre-market after it reported Q2 top and bottom lines with Cloud revenue beating and Copilot eclipsing 30mln paid seats. On the other side, Meta slumps 9% after Q2 EPS missed estimates while Q3 revenue guide was a little soft and FY capex and total expense guide was elevated again.
Busy mega-cap earnings sessions that split the two biggest software and platform names tend to leave index futures firmer than breadth underneath, since the cloud and AI-exposed cohort carries the index weight while the beaten name drags a narrower peer set; the read-through pattern is that cloud revenue beats have historically mattered more for sector sentiment than a single consumer-platform guide-down, which trades more idiosyncratically. In Europe, the combination of stronger flash GDP with hotter Spanish and German state inflation prints is the familiar mix that firms the growth narrative while keeping the front end sensitive to the national CPI aggregation that follows; in past episodes the German regional prints have been the tell for the national number. The crude pullback on reported Hormuz de-escalation talks fits the standard sequence for geopolitical risk premia, which build on headlines and bleed out on talk of negotiation, with freight and insurance costs the slower-moving residual. Sector leadership in construction, chemicals and basic resources is the typical footprint of a crude-down, yields-down, risk-on session rather than of an earnings-driven one. Worth noting as follow-ons: whether the soft guidance attributed to tariffs and currency recurs across the remaining consumer and autos reporters, and whether the capex guidance from the big US names feeds the broader AI-spend complex rather than staying stock-specific.