Unveiling the European Economic Pulse: A Week of Earnings to Unleash Spending Power

“European Companies Set to Reveal Quarterly Earnings Amidst Cooling Inflation and Rising Interest Rates”

Several European companies are set to release their quarterly earnings this week, providing insights into pricing and spending power as inflation cools and interest rates approach their peak. The week begins with Julius Baer’s first-half report, which is expected to show a surge in inflows as the wealth manager benefits from Credit Suisse Group’s decline. Net new money is projected to reach 6.5 billion Swiss francs (€6.7 billion) for the first six months, compared to outflows of 1.1 billion francs the previous year.

Ryanair is also expected to provide an update on Monday, revealing the budget airline’s performance in the fiscal first quarter. The expanded fleet, strong demand, and stable costs are likely to have contributed to its success. However, challenges such as air traffic control and pilot strikes, as well as potential delays in Boeing deliveries, could have a negative impact. Consensus shows that passenger numbers likely grew by 10% in the quarter, surpassing pre-COVID levels by 25%.

On Tuesday, the French company behind Moët champagne and Louis Vuitton, LVMH, is set to release its first-half results. The reopening of China and the recovery of travel retail are expected to drive gains, offsetting a slowdown in the US. LVMH likely experienced strong demand across Asia and Japan, with stronger pricing power potentially boosting margins. The company’s low net debt position leaves room for potential deals. Unilever will also announce its first-half results on Tuesday, with organic sales growth expected to exceed 8% driven by higher prices. The company is on track to achieve at least the upper end of its guided range of 3%-5% for 2023. The market will be eager to hear new CEO Hein Schumacher’s initial views after taking over this month.

Deutsche Bank is expected to benefit from higher interest rates, supporting higher year-on-year revenue growth in its corporate and private banks in the second quarter. Second-quarter net revenue is anticipated to grow by 7%. However, management has cautioned about a possible 20% drop in fixed-income trading for the period. Thursday will see the release of earnings reports from Gucci parent company Kering and cosmetics firm L’Oreal. Kering is taking steps to revive the embattled Gucci brand, with the departure of its head, Marco Bizzarri, scheduled for September. Organic growth at Gucci is projected to reach 4.2% in the second quarter, up from 1% in the first. L’Oreal may focus on online ad spending in China to boost cosmetics sales at physical stores. The company’s organic growth is expected to soften to 11.7% from 13% in the January to March period.

Nestle’s results may show a second-quarter slowdown, but growth in the first half is still expected to fall within the company’s target range of 6%-8% for the year. However, fragile consumer confidence could lead people to opt for cheaper brands, making the guidance more challenging in the second half. AstraZeneca’s second-quarter results, to be released on Friday, may receive a $712 million (€639 million) boost following the simplification of a royalty contract with Sanofi and Sobi. While this will help offset tough year-on-year comparisons, the company may hold off on adjusting its guidance until it has a better understanding of full research and development spending, which likely increased last quarter.

In the tech sector, the Nasdaq 100 experienced a 0.3% decline, deepening the losses from the previous week when technology companies were affected by lower-than-expected sales at Netflix and an adjusted earnings miss at Tesla. Alphabet, the parent company of Google, and Exxon Mobil saw gains, while Meta, the owner of Facebook, fell ahead of their earnings reports expected this week.