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A to Z: Alphabet Falls Over Rising Costs - EMEA Brief 05 Feb

Guest JoeIG


  • Alphabet, Google's parent company, saw its share prices fall over 3% in extended trading on the back of continuing pressure on advertising prices and decreasing margins - adding to the concern over the company's periodic surges in spending. This comes despite the company beat expectations across the board in its Q4 results. 
  • Theresa May will travel to Ireland today to try to ease concerns over a hard border situation in Ireland upon Brexit. Meanwhile, UK Steel has warned that a no-deal Brexit would severely impact the British steel industry, worth £2.8bn a year in sales.
  • The US Fed's Chairman, Jerome Powell, has signaled that the rate hikes and balance sheet tightening may be coming to a halt amid a concerning outlook for the US economy due to global growth and trade wars. 
  • The S&P 500 ended 0.7% higher to claim its fourth successive daily gain.
  • Australian equities jumped 2% as a government-appointed inquiry scoured the country's financial sector for misconduct, leaving the banks to rise. Japan's Nikkei ended the day down 0.2%. Markets across most of Asia were offline for Lunar New Year. 
  • The AUD strengthened after the Australian central bank halted interest rate changes, noting uncertainty over falling house prices. The currency ended 0.5% higher at $0.7263.
  • The pound and the euro both remained steady at $1.3040 and $1.1431, respectively. 
  • Brent Crude rose 0.4% to $62.75 a barrel, whilst Gold was up 0.2% to $1,314 an ounce. 

Asian overnight: A thin Asian session saw Australian stocks rise sharply amid a gains for the financial sector and the miners. Chinese and Hong Kong markets remained closed for Lunar New Year, with Japanese stocks trading somewhat mixed over the session. The Australian dollar gained ground following a decision from the RBA to retain rates at 1.5%, while their trade balance rose to the second largest surplus on record. However, much of this was thanks to a huge fall in imports; the largest one-month fall in imports recorded.

UK, US and Europe: Looking ahead, the UK services PMI looks set to be the big release to watch out for, following on from worrying manufacturing and construction sector surveys. With the UK economic growth picture hugely reliant upon the services sector, today’s figure will have significant implications for Q1 growth. That services theme continues into the afternoon, with the US non-manufacturing PMI reading expected to tick lower. On the corporate front, watch out for numbers from Walt Disney and Snap.

South Africa: Global markets are trading flat to mixed this morning with Hong Kong and China closed for the Lunar New Year festivities. Oil has started to rise again with an embargo on Venezuela's largest oil producer and OPEC production cuts providing some of the short term excuses for the move. The rand remains firm against the dollar, while metal prices are mostly firmer this morning. The BHP Group is up 1.1% in Australia, suggestive of a positive start for local miners. Anglo American Platinum has released a strong trading update which is expected to further bouy platinum miners this morning, following on from yesterday's upbeat report from Impala Platinum .

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


Source: Daily FX Economic Calendar

9.30am – UK services PMI (January): previous reading 51.2. Market to watch: GBP crosses

3pm – US ISM non-mfg PMI (January): forecast to fall to 57.5 from 58. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Tesla has agreed to buy Maxwell Technologies in a $218m deal, in an attempt to lower the cost of car batteries.
  • Ocado reported a loss of £44.9 million for the year, from a £9.8 million loss a year earlier. Sales were up 12% to £1.48 billion, and the firm expects the retail sales business to report growth of 10-15% in 2019.
  • BP said that replacement cost profit rose to $12.7 billion for 2018, compared to $6.2 billion a year earlier. Upstream production rose 8.2% over the year, and the dividend was raised by 2.5% to 10 cents per share.
  • Centrica has signed a long-term supply deal for liquefied natural gas with a planned project in Mozambique, as it looks for new sources of fuel as North Sea output declines.
  • St Modwen Properties reported a 4.3% rise in net asset value per share, to 470.4p, for the year through to December. The dividend was raised 13.1% to 7.1p per share.

Cobham upgraded to hold at Kepler Cheuvreux
Wirecard upgraded to buy at LBBW
Morrison upgraded to buy at Berenberg
Orpea raised to buy at Kepler Cheuvreux

Carlsberg downgraded to neutral at Oddo BHF
Lundin Petroleum downgraded to hold at HSBC
Merlin downgraded to hold at SocGen
Segro downgraded to hold at SocGe

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