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AIRLINES AND DEFENCE DEFY STOXX WEAKNESS (1003 GMT)
European shares got off to a weak start, with data showing German investor morale turning positive for first time since the Ukraine war failing to give any impulse, a sign that the good macro news may already be in the prices.
Attention was elsewhere. Solid numbers from EasyJet set its shares for their best day since March 2022, up 10%, while lifting the whole sector to fresh 11-month highs, as markets warm to the industry's improving outlook.
Also defying the broader weakness are defence stocks. Germany looks set to send Leopard 2 tanks to Ukraine and allow other countries such as Poland to do the same to help Kyiv fight off Russia's invasion.
Leopard maker Rheinmetall rose by as much as 4% at one point to a new record high, while aerospace and defence stocks neared their highest in almost 3 years.
Tech was a drag, tracking Nasdaq losses, following an disappointing cloud guidance from Microsoft. A mixed outlook and decreasing net bookings from ASML sent shares in Europe's biggest tech company down more than 1% following a good run this year. A weak healthcare sector also weighed.
The STOXX 600 was last down 0.6%.
EUROPE EYES FLAT START, EARNINGS TAKE CENTRE STAGE (0747 GMT)
Stock futures are roughly flat in Europe, shortly before the cash-market open, signalling a steady start as investors parse signals from the earnings season after a new year rally that has been driven by economic optimism.
EuroSTOXX50 futures were down 0.1% and FTSE 100 contracts were inching just marginally higher. Nasdaq futures fell 0.6% after Microsoft guided to cloud revenues below analyst expectations, a possible negative readacross for German software maker SAP.
Shares in ASML, Europe's largest technology company, are seen rising after the supplier of equipment to chip makers reported better-than-expected earnings.
In the UK, traders are calling a positive for airline EasyJet and insurance group Aviva following results, while French train maker Alstom looks set to benefit from strong order numbers.
On a downbeat note, fragrance maker Givaudan and electrical equipment maker Landis were both seen falling in Zurich following results.
RUNNING OUT OF BREATH (0656 GMT)
After a strong start to the year, fuelled by hopes that the outlook for the world economy was not shaping up as bad as expected a few months ago, stocks are finally taking a breather.
Asian equities held steady on Wednesday near seven-month highs after a mixed session on Wall Street.
On the corporate front, Barclays CEO C.S. Venkatakrishnan appointed former Credit Suisse dealmaker Cathal Deasy as co-head of investment banking with a view to grow the business and an eye for succession.
And a group of minority shareholders that appealed against the French government's full nationalisation of energy giant EDF dropped the motion on the eve of the hearing.
On a thin day for economic data, focus will be on U.K. producer prices and the German IFO.
European stock futures dipped 0.3%, indicating a weaker start for markets, while U.S. stock futures shed 0.5%.
Revenue at Europe's largest companies is expected to have risen by just 0.9% in the fourth quarter, Refinitiv I/B/E/S data showed on Tuesday.
The forecast, which tracks companies listed on the pan-European STOXX 600 benchmark index, represents a drop from last week when analysts expected revenue growth of 4%.
Investment strategists at Standard Chartered say it is time to fade the rally seen in European stocks and the euro since the lows of September.
They say an unusually warm winter has allayed fears of wide-spread energy shortages and rationing in Europe. China's economic reopening has been another tailwind for European exporters' prospects.
But they outlined many challenges for European equities, including stretched technicals and an increasingly hawkish central bank policy.
Meanwhile, Microsoft kicked off the U.S. tech season with a sobering outlook and forecast that third-quarter revenue in its cloud business would come just shy of market forecasts.
The 2% increase in the last quarter's revenue, the slowest in more than five years, signalled tougher times for tech companies just as Apple and Google-parent Alphabet are due to report earnings next week.
Key developments that could influence markets on Wednesday:
Economic data: U.K. December producer prices, Germany January Ifo
European results: Christian Dior
U.S. results: IBM, AT&T, Boeing, Whirlpool
