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:

‘Would Be Bad’

U.S. President Donald Trump said it “would be bad” if Saudi Arabia’s crown prince and king knew what happened to journalist Jamal Khashoggi in an interview with Fox Business. That came after pressure was ramped up on Trump to act against the kingdom following Khashoggi’s disappearance, with U.S. Senator Lindsay Graham slamming Prince Mohammed as a “wrecking ball” and a “toxic” figure. All in all, relations between the two nations are still looking rockier than before and could continue to weigh on European stocks with exposure to Saudi Arabia, while also underpinning the oil price.

Irish Border

U.K. Prime Minister Theresa May will head to the European Union summit in Brussels after being told her latest proposals would be thrown out by parliament, a keen reminder for her of the constraints she faces in trying to negotiate the exit. The Irish border remains the main stumbling block, both on the U.K. and EU sides, and May was told the current guarantee to avoid a policed border there doesn’t have enough votes to pass. Expect further whipsawing in sterling and either pressure or relief for U.K. stocks influenced by the sentiment around Brexit, including property and homebuilding. U.K. inflation data is also due and could well help determine the pound’s moves today.

Netflix Blowout

Netflix Inc. got the earnings season for the FAANG stocks off to a blistering start, outpacing expectations on subscriber growth and helping its shares boom in extended trade. It has no direct peers in Europe but the huge beat and the big growth in subscribers outside the U.S. have the potential to spark yet further investment in content, potentially including more foreign-language programming. That could read-across to the likes of the U.K.’s ITV Plc and Germany’s ProSiebenSat.1 Media SE, which are both attempting to make gains in the streaming space. Indeed, the strong results could help sentiment overall in European tech stocks, along with...

...Chip Optimism

U.S. semiconductor-equipment maker Lam Research Corp. beat quarterly estimates and saw its shares rise as a result; that was followed this morning by results from Dutch semi- equipment group ASML Holding NV, which pointed to net sales in the fourth quarter ahead of analyst estimates. Basking in the glow of Netflix and a strong day for U.S. tech stocks which fed into the Asian session, you can anticipate a day in the green for Europe’s tech sector too.

Advertising Pessimism

Even if Netflix boosts part of the media sector, a disappointing report on U.K. advertising spending could weigh on at least the likes of WPP Plc and Publicis Groupe SA. The Institute of Practitioners in Advertising said growth in British advertising budgets slowed to the weakest rate in 2 1/2 years in the third quarter. The reason? Predictably enough, uncertainty about the Brexit negotiations.

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