Morning Bid: Earnings to the rescue?

Styrofoam bull figures stand on a counter on the trading floor at the stock exchange in Frankfurt, Germany January 7, 2016. European shares fell sharply on Thursday after China accelerated the depreciation of the yuan, sending currencies across the region reeling and domestic stock markets tumbling . Germany’s DAX dropped 3.6 percent, while Britain’s FTSE 100 weakened by 2.7 percent. REUTERS/Kai Pfaffenbach

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A look at the day ahead in markets from Tommy Wilkes.

The European corporate earnings season picks up pace on Tuesday and the evidence so far is that rising costs and slowing demand are beginning to bite.

A few weeks back the big concern for traders was that the next leg lower for stock markets would be triggered by the rewriting of lofty earnings expectations.

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While this hasn’t come to pass thanks to some businesses doing better than expected, the evidence on Tuesday suggests caution.

Swiss bank UBS (UBSG.S) flagged a smaller-than-expected rise in second-quarter net profit and Logitech International (LOGN.S) reported a 38% fall in first-quarter adjusted profit and cut its full-year 2023 outlook.

According to Goldman Sachs, around 34% of the European companies reporting results for the second quarter have missed consensus by at least 5%, the highest fraction of misses since the sovereign debt crisis in 2010.

Trading was quiet across markets as investors brace for a slew of European companies to update this week as well as some of the big tech firms in the United States, including Microsoft on Tuesday.

Stocks looked set for modest declines in both Europe and the United States, while the dollar steadied not far from two-decade highs.

The start of a two-day Federal Reserve meeting, which concludes Wednesday, is also keeping traders on the sidelines with policymakers expected to raise interest rates by 75 basis points. Market attention will be squarely focused on the future path of interest rates.

Key developments that should provide more direction to markets on Tuesday:

US Federal Reserve starts two-day meeting

US May home price index

US June new home sales data

US 5-year Treasury auction

Federal Reserve Bank of Philadelphia issues July Non-manufacturing Business Outlook Survey for July

Nigeria, Hungarian central bank meetings

Europe earnings: UBS, Lindt, ITV, Unilever, Michelin, Deutsche Boerse, Vivendi, LVMH, Easyjet, Unicredit

US earnings: United Parcel Service Inc, General Electric, 3M Company, Xerox Corp, Coca-Cola, McDonald’s, GM, Microsoft, Google, Boston Properties

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Editing by Saikat Chatterjee;

Our Standards: The Thomson Reuters Trust Principles.

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