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Amazon's Profits More Than Double in First Quarter - EMEA Brief 26 Apr

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  • Amazon's net income for its first quarter more than doubled to $3.6bn, or $7.09 a share, from $1.6bn in the same quarter last year, beating analysts' expectations of $4.72 a share. Revenue rose 17%, in line with consensus estimates, although it was the lowest YoY growth rate since the beginning of 2015. Operating expenses increased by 13%, down from  41% growth in the same quarter of 2018. Amazon plans to roll out one-day shipping worldwide for its Prime members this year, which will likely drive up further spending. 
  • Meanwhile, other after hours earnings in the U.S. yesterday were positive, as Starbucks, Intel, and Ford, all beat expectations. 
  • The Dow Jones fell 0.51% to close at 26,462.08 as shares of 3M dropped 12.9% after the company reported poor earnings, dragging down the index. The S&P 500 and the Nasdaq fared slightly better, led by Facebook and Microsoft. The S&P ended almost flat at 2,926.17, whilst the Nasdaq gained 0.2% to 8,118.68, hitting an intraday record.
  • Asian equities had a fairly mixed and quiet session. China's CSI 300 fell 0.9%, hitting the 5% mark for cumulative losses this week. 
  • Merger talks between Deutsche Bank and Commerzbank have collapsed in failure, as the banks cited restructuring costs and execution risks, as well as the need for extra capital as the reasons. 
  • In the currency market, the dollar held around two-year highs on speculation that U.S. data releases will show the economy is outperforming the rest of the world. The euro was down 1% for the week at $1.1133.

Asian overnight: Amazon and Intel dominated earnings reports last night, but for different reasons. The retail and cloud computing giant succeeded in posting a fourth consecutive quarter of record profit, but the chipmaker suffered after slashing forecasts for the year. Asian chip firms also fell, casting a cloud over the session.

UK, US and Europe: Markets get their first look at first quarter US GDP today, with quarter-on-quarter growth expected to slow to 1.8% from 2.2%. European banks remain in focus with earnings from RBS and embattled German titan Deutsche, while Total and Exxon Mobil figures mean that oil firms are also under the spotlight today.

South Africa:  Global indices are pointing to a flat to marginally lower start for our local bourse today. While US corporate earnings remain a core focus in equity markets right now, today will also see 1Q19 Advance US GDP data in focus. The dollar has softened marginally, lifting precious metal prices modestly. Base metal prices are under pressure this morning. Brent Crude trades marginally lower, although remains at elevated levels. The rand remains weak although off its worst levels of the month. Tencent Holdings is up 0.1% in Asia, suggestive of a similar start for major holding company Naspers. The BHP Group is down 1.5% in Australia suggestive of a lower start for local diversified miners.

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

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Source: Daily FX Economic Calendar

1.30pm – US GDP growth (Q1, advance): QoQ growth to be 1.8% from 2.2%. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • RBS saw net profit for the first three months of the year fall 13% to £707 million, while pre-tax profit was down 16% to £1.01 billion. Cost reductions of £45 million in Q1 meant that the annual target of £300 million in savings remained in place.
  • WPP reported a 0.9% rise in revenue for the first quarter, to £3.59 billion, but it was down 0.6% on a constant currency basis. Like-for-like revenue fell 2.8%, with client losses in the US hitting performance.
  • Hastings said that its full year loss ratio improved after reporting revenues fell 1% to £183.1 million. Gross written premiums rose 4% to £235.5 million for the first quarter.
  • Pearson reported a 2% rise in underlying sales for Q1, meaning it remains on track to hit annual earnings guidance. Adjusted operating profit of £590-640 million is expected for the full year.

Commerzbank upgraded to hold at Nord/LB
Millicom GDRs upgraded to overweight at Barclays
Stagecoach upgraded to buy at Citi

Atlas Copco downgraded to hold at Handelsbanken
Bonava downgraded to reduce at Kepler Cheuvreux
Telecom Plus cut to neutral at JPMorgan
UBS downgraded to hold at DZ Bank

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