Here's What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we are watching ahead of the market open in Europe:


Both U.K. Prime Minister Theresa May and French President Emmanuel Macron struck conciliatory tones ahead of a European Union summit on Brexit on Wednesday. Brussels, too, sounded more optimistic, saying the current stalemate in talks which weighed on domestic U.K. stocks on Monday was “more of a pause than a breakdown.” The EU is not ruling out progress being made at the summit, but the pound is likely to remain choppy as headlines flow from the stakeholders before anything official is announced. FTSE 100 futures are pointing marginally higher.

Saudi Tensions

U.S. President Donald Trump said he is uncertain if his administration will participate in a Saudi investment conference, which has already seen an exodus of sponsors and participants, in the wake of the disappearance of journalist Jamal Khashoggi. The oil price has been underpinned by the tensions and on Monday, defense contractor BAE Systems Plc sunk after the U.K. joined other countries in expressing “grave concern” about Khashoggi’s disappearance.

U.S. Banks...

JPMorgan Chase, Citigroup and Bank of America have taken their turn, now the attention shifts to Goldman Sachs and Morgan Stanley to provide a state of the nation portrait of investment banking in the third quarter. Thus far, the reports have been muted and mixed. Bank of America and JPMorgan both fell short on FICC revenue while Citigroup beat. But Citigroup missed on equities, where both Bank of America and JPMorgan were strong. Watch for a reaction to today’s results in the Stoxx 600 Banks index and in European investment banks like Barclays Plc and Deutsche Bank AG.

...and U.S. Tech

Netflix will report results after the U.S. close, the first of the FAANG stocks to update this earnings season, and will likely be on the tips of tongues throughout the day in anticipation. Europe does not have its own Netflix, so any direct read-across is negligible. However, bullish comments on extra investment in foreign language content could have an impact on European content producers. Also, any really positive results that send Netflix shares soaring could help sentiment on the tech sector generally, which may feed into a better day for the sector in Europe.

Spain and Italy

You cannot move for a controversial budget target in Europe’s periphery these days. Spain’s Socialist government is sticking to its pledge to widen its deficit targets in 2019, laying down the gauntlet to the opposition People’s Party to use its Senate veto against the plans. Italy is due to discuss its own budget plans, already the subject of heavy criticism from the European Union, on Tuesday. Its populist government reached an agreement on the budget and tax measures on Monday. There is every chance comments filtering out from politicians in both countries could spark moves in government bond yields and impact their local stock markets, particularly banks, utilities and insurers.

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