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EUROPEAN GAS INVENTORIES BACK TO 10-YEAR AVERAGE (1117 GMT)
As well as watching trading screens, market players are keeping one eye on European gas supplies as a key metric when weighing up the economic outlook.
According to UBS analysts, European gas storage usage reached its 10-year average at the beginning of August.
As of August 13, storage was 74% full - above last year's level of 61%. At this rate, by the end of October storage levels could be near to 90%, the analysts said in a note.
We can thank liquid natural gas imports for that.
"Imports (of LNG) were up 110% y/y in July and are up 61% y/y YTD which helps to offset low volumes from Russia," they said in a note.
On the other hand, Russian exports have continued to decline.
"In 1H Aug Gazprom exports to Europe stood at ~2.6bcm, down 64% y/y, close to the July daily average."
The analysts said they expect LNG imports in Europe to remain close to first half levels in the second half, but that "risks are to the downside", with potentially more competition from Asian buyers and risk of supply disruptions.
"And these come at a high price, TTF (front-month) approaching €250/MWh today."
STOXX 600: NOT MUCH TO EXPECT FROM EARNINGS NOW (0926 GMT)
The better-than-expected Q2 earnings season, along with a weaker euro, was an essential driver of the summer rally which has lifted the pan-European STOXX 600 over 10% since the June lows.
But as you see can below from the latest Refinitiv I/B/E/S estimates, profit growth is expected to reverse into an earnings recession in 2023:
Moving forward, European stocks, still down over 9% year-to-date, will therefore not likely be able to count on earnings to rebound further this year.
"Q2 earnings have not been the disaster some had predicted, but mixed guidance, high inventories and rising margin pressures offer little comfort", Barclays strategists argued in a note.
So with little to expect from earnings growth, multiples need to expand for the rally to keep on going.
"As slowing growth caps the upside to FY estimates, at best, the bull case for equities relies on renewed P/E expansion", they wrote, calling such a re-rating "elusive".
Then again, as they show in this chart, the low level of European price-to-earnings ratios seems to suggest that there is potentially some upside:
(Julien Ponthus)
STOXX SET FOR SIXTH CONSECUTIVE DAY OF GAINS (0753 GMT)
European shares are into their sixth consecutive day of gains, with the STOXX 600 opening 0.3% higher as markets continue to brush off fears of an energy crisis and recession on the continent.
The financial services sector is leading gains with a 0.88% rise, while healthcare and basic resources are ringing in at the bottom, down 0.22% and 0.35% respectively.
Shares in Uniper are falling 8.2% and are at the bottom of the STOXX 600, unsurprising given the company just reported a hefty 12 billion euro loss in the first half .
Shares in GSK are down 2.1% but stayed above recent lows after the plaintiff in the first lawsuit over the heartburn drug Zantac scheduled to go to trial agreed to drop his case .
At the top of the index is Swiss laboratory instruments maker Tecan Group, surging 12% after a H1 beat and raising its FY sales outlook.
MORE DOOM AND GLOOM LOOMS FOR EUROPE (0640 GMT)
Europeans will be hoping Wednesday’s economic data will provide some respite after a string of negative headlines, but past form suggests they’d be foolish to bet too much on it.
They might even be better off taking a punt on depressing figures, as at least their winnings might provide some small cheer if the bad news arrives.
British consumer price inflation jumped to 10.1% in July, its highest since February 1982, up from an annual rate of 9.4% in June, intensifying the squeeze on households, official figures showed on Wednesday
That’s not good news for British workers who saw earnings for the second quarter adjusted for inflation fall by 4.1%, the biggest drop since records began in 2001, according to data released on Tuesday.
The final reading for Euro zone Q2 GDP is also due on Wednesday, and while preliminary data showed faster than expected growth, even then economists said it might be the economy's last hurrah.
If data from down under offers any clues, they aren’t great.
Earlier on Wednesday New Zealand’s Central Bank signalled a more hawkish tightening path over coming months to restrain stubbornly high inflation, even as it delivered its seventh straight interest rate hike, and Australian wage growth missed forecasts and lagged badly behind inflation.
The kiwi dollar initially climbed on the news before giving up its gains, though the Aussie held onto its losses.
Asian shares eked out small gains in morning trading, following overnight gains on Wall Street, where economic data is less depressing.
Japan was in the lead with the Nikkei up 1%, while MSCI’s broadest index of shares outside Japan rose just 0.2%.
Key developments that could influence markets on Wednesday:
UK Jul CPI, Jul PPI
Euro zone Q2 flash employment, Q2 GDP
US Jul retail sales
US 20-year Treasury auction
Fed Reserve releases minutes from July policy meeting at 1800 GMT
New Zealand's central bank meeting and press conference.
European earnings: Swiss Life, Carlsberg, Uniper
US earnings: Lowe’s, Target, Cisco
(Alun John)
WHAT ECONOMIC GLOOM?: (0629 GMT)
European shares look set for their sixth consecutive day of rises, with futures contracts signalling increases of 0.3% as they track U.S. shares which posted gains on Tuesday after some strong showings from major retailers.
U.S. retail sales data will give a further insight today but in the meantime there are some not so pretty earnings coming out of Europe to contend with.
Danish brewer Carlsberg reported Q2 sales below expectations, while Germany's Uniper, which secured a 15 billion euro bailout last month, reported a net loss of more than 12 billion euros ($12.2 billion) for the first half.
Better news is coming from insurer Swiss Life which has increased its half year net profit by 4%.
On the data front, UK CPI was seen rising to the highest level since 1982, up to 10.1% in July from 9.4% in June.
(Lucy Raitano)
