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Facebook Earnings "LIKED" by Shareholders - EMEA Brief 31 Jan

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MichaelaIG

  • Facebook shares soared 12% after Earnings report of $2.38 per share crushed $2.19 expectation. Facebook's revenue forecast of $16.39 billion was also outdone coming it at a reported $16.91 billion
  • Tesla shares fell 5% in after hours trading after disappointing earnings report of $1.93  per share. This came after a 3.8% share rise in the regular session pre-results.
  • Microsoft also saw underwhelming results report. Despite beating earnings expectation of $1.09 by 1 cent per share, Microsoft missed $32.51 billion revenue expectation coming in at $32.47 billion. Subsequently the share price fell by 4%. 
  • China's manufacturing activity contracted for the second month straight, the National Bureau of Statistics of China reporting a PMI of 49.5 for January. 
  • Fed pledge to keep interest rates steady saw Asian Stock gain. The Shanghai composite rose 0.6% and Hang Seng index climbed 1.21%. Meanwhile the Dow surged 400 points and the S&P 500 gained 1.56%. 
  • Gold prices also increased following the Fed announcement marking day 4 of positive gold price movement. 
  • Oil headed for biggest monthly gain since April 2015 as Saudi Arabia and Russian output levels fall lower. Brent march contracts rose 42 cents higher to sit at $62.07 per barrel. 
  • Saudi Arabia ends corruption crackdown after reaping $100 billion in cash, real estate and other assets as settlements. 

Asian overnight: Asian markets enjoyed a bullish session overnight, as the Australian ASX 200 provided the only dampener on an otherwise-positive session throughout Japan, China, and Hong Kong. The Fed’s decision to keep rates unchanged was largely expected, yet markets have taken their lead from a statement which saw the committee switch away from constant rate hikes, and towards a more data dependant policy. Rather than setting out the exact indicators they are looking for, the FOMC statement said that ‘it will patiently continue to monitor incoming data and economic and financial developments to evaluate their implications for the economic outlook’. This decision to shift onto a slow course of rate hikes helped strengthen stocks, weaken the dollar, and boost gold prices. In other news, Chinese manufacturing PMI ticked higher to 49.5 yet remained within contraction, while the non-manufacturing reading continues to outperform, rising from 53.8 to 54.7.

UK, US and Europe: Looking ahead, GDP is going to be crucial for market sentiment, with Q4 Spanish, eurozone, Italian, and Canadian GDP readings all released throughout the day. With the Year-on-Year figure for the eurozone expected to slow markedly from 1.8% to 1.2%, this reading could have significant implications for both monetary policy and future growth prospects.

EU chief negotiator Michel Barnier says there is to be no renegotiation of the Irish backstop as it is "part and parcel" of Brexit deal. May appears stuck between a rock and a hard Brexit as Parliament have voted against both the Brexit deal presented, which incorporates the backstop, and on Tuesday voted against a No Deal Brexit. 

South Africa: A more dovish Federal Reserve commentary overnight has seen a sharp weakening of the US dollar, rise in equity markets as well as commodity prices. The fed has said it would be patient with further hikes this year suggesting a pause (possibly an end) to the current tightening cycle. US markets closed around 2% higher last night following the news. In turn we are expecting a higher open on the Jse this morning amidst what is a light economic calendar today.

Economic calendar - key events and forecast (times in GMT)

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8.55am – German unemployment rate (January): rate to hold at 5%. Market to watch: EUR crosses

10am – eurozone GDP growth (Q4, flash): QoQ rate to rise to 0.6% from 0.2%, while YoY figure to increase to 1.9% from 1.6%. Market to watch: EUR crosses

1.30pm – US jobless claims (w/e 26 January): previous week saw claims fall to a fifty year low of 199K. Markets to watch: US indices, USD crosses

2.45pm – US Chicago PMI (January): expected to fall to 62.5 from 65.4. Markets to watch: US indices, USD crosses
 

Source: Daily FX Economic Calendar

 

Corporate News, Upgrades and Downgrades

  • Diageo said that first-half operating profit rose 11% to £2.4 billion, while net sales were up 5.8% to £6.9 billion. Organic volume rose 3.5%. The outlook was left unchanged.
  • Shell said that full-year earnings rose 36%, to $21.4 billion, while earnings in Q4 were up 32% to $5.688 billion.
  • Unilever reported a rise of 2.9% in Q4 sales, lower than the 3.5% expected by analysts. Full-year sales growth said that it expected full-year sales growth to be at the bottom end of its 3-5% forecast.
  • Tesla CFO Deepak Ahuja announced plans to retire sometime in 2019.

Deutsche PBB upgraded to buy at Citi
Ferrovial upgraded to add at AlphaValue
Telenor upgraded to hold at Pareto Securities
Volvo upgraded to buy at SEB Equities

Ahold Delhaize cut to underweight at JPMorgan
Petra Diamonds downgraded to neutral at JPMorgan
Randstad downgraded to hold at ING
Unibail downgraded to underweight at Barclays

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