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Charting the Markets: 4 May

Indices mixed as markets await ECB decision. EUR/USD steady ahead of ECB, while GBP/USD holds up well and USD/JPY stabilises. And gold surges, while oil prices recover following recent losses.

Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 04 May

 

 

 

 

16 Candlestick Patterns Every Trader Should Know | IG US

 

This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

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For more up to date news on how markets will open, the latest earnings and economic news, watch IGTV live in the platform at 07:30am UK.

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Today’s coverage:

Indices: Another day where European mkts indicating higher, but it’s fragile as traders keep their fingers over the sell switch awaiting more bank failures

FX: Watching USD around NFPs at 1:30pmUK. GBPUSD inverted head and shoulders neckline just broken – gains ahead?

Equities: Earnings – IHG IAG AFKLM ADS. Last night earnings AAPL up 2.6%, LYFT down 16%, COIN up 9.6%

Commods: Gold holds the gains while oil barely manages to scrape itself off the recent lows  

 

 

 

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Early Morning Call: FTSE 100 opens higher but is poised to post a second week of declines

Equity markets in Europe opened higher after a week of declines.

 Jeremy Naylor | Analyst, London | Publication date: Friday 05 May 2023 09:21

Equity market overview

Equity markets in Europe opened higher after a week of declines. Yesterday, US indices continued to fall, and are now poised to post the worst weekly performance in two months.

In China, service activity grew for a fourth straight month in April. The Caixin/S&P Global services PMI fell to 56.4 in April from 57.8 the month prior. The Caixin/S&P's composite PMI, which includes both manufacturing and services activity, fell to 53.6 from 54.5 in March, also marking a fourth straight month of expansion.

NFPs

After the Federal Reserve (Fed) and European Central Bank (ECB) decisions, the market now awaits US non-farm payrolls (NFP) for April. Economists forecast on average 180,000 job creations. The unemployment rate is seen rising to 3.6%, from 3.5% the previous month, while average hourly earnings should rise by 0.3% month-on-month (MoM), 4.2% year-on-year (YoY), matching last month's pace.

The US dollar trades lower ahead of the job report.

Equities

On the equity markets, IAG lifted its 2023 profit forecasts on strong travel demand. The British Airways owner surprised the market with an adjusted operating profit of €9 million. The market expected a €173Mln loss. IAG now estimates that annual profit will come in above the top end of the €1.8 billion to €2.3Bln given in February.

Air France posted a wider operating loss than expected of €306Mln. Revenue was slightly higher than forecast, driven by strong summer bookings.

Adidas posted better than expected number for the first quarter (Q1). Adidas reported a small operating profit of €60Mln, higher that the €15Mln expected. It posted a net loss from continuing operations of €24Mln. Revenue was also better than expected at €5.27Bln.

Apple shares rose 1.5% in extended trading last night, after the US' largest company by market value beat Wall Street expectations. Earnings came in at $1.52 per share, unchanged compared to the same quarter a year ago, and higher than the $1.43 anticipated by analysts. Revenue fell 2.5% to $94.8Bln. The market had forecast a 4.4% decline to $92.9Bln.

Apple raised its dividend by 1 cent to 24 cents a share. iPhone sales were up 1.5% to $51.3 billion, beating expectations for a 3.3% drop. According to research firm Canalys, global smartphone shipments fell 13% during the first three months of 2023. But not all of Apple products shared the same fate. Mac sales fell more than 30% compared with analyst estimates of a 25% decline. Sales of wearables - devices like AirPods and the Apple Watch - fell about 1% compared with estimates for a 4.4% drop.

Investors are still waiting for the company's next major hardware product. According to Bloomberg, a mixed-reality headset could be unveiled as soon as next month.

Coinbase jumped nearly 11% in after-hours trading. The crypto exchange platform posted a smaller loss of 39 cents per share than expected. Revenue also was better than anticipated at $772Mln. The company lowered operating expenses by 24% from last quarter and reported $607 million in expenses, much lower than its prior range of between $625 million and $675 million. But trading volumes more than halved to $145Mln. Retail trading volumes sank 72%.

Lyft shares sank yesterday evening after the company posted a much wider loss than anticipated - a loss per share of 50 cents, compared to expectations of an 8 cents loss. Revenue came in at $1Bln.

To catch up with its competitor Uber, Lyft had to cut prices. This translated into 10% more riders in the first three months of the year, but it also lead to a drop in margins.

In terms of guidance, Lyft expects revenue of $1Bln and $1.02Bln, below estimates of $1.08 billion. Core earnings should come between $20Mln and $30Mln, way behind the forecast of $49.3Mln.

 

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Charting the Markets: 5 May

Markets trade sideways, but what will it take to steer a firm direction?

 Jeremy Naylor | Analyst, London | Publication date: Friday 05 May 2023

Serge Berger, founder of TheSteadyTrader.com joins us for today's edition of Charting the Markets.

He looks at rates, the dollar and whether what’s happening in the US is replicated in Europe for the DAX.

 

 

16 Candlestick Patterns Every Trader Should Know | IG US

 

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Early Morning Call: GBP/USD near 1-year high ahead of BoE decision, Q1 GDP data

This week, a set of macroeconomic indicators are likely to have a great impact on the GBP/USD cross, starting tomorrow with consumer price index in the US.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Tuesday 09 May 2023 09:36

Equity market overview

Equity markets were mixed in Asia-Pacific overnight. Hong Kong’s Hang Seng underperformed as trade surplus in China widened to over $90 billion. Imports unexpectedly fell by nearly 8% year-on-year (YoY), and exports rose by 8.5%, after a 14.8% increase in March.

Retail sales growth in the UK held its pace in April according to the BRC. The consortium said spending at its members' stores rose by 5.1% YoY in annual terms last month. But with a UK consumer price index (CPI) growth stubbornly holding above 10%, this means the rise in sales value masked a sustained drop in sales volumes.

Helen Dickinson, the BRC's chief executive, said volumes fell for both food and non-food, adding "Clothing sales underperformed as the poor weather left customers thinking twice before decking out their summer wardrobe".

Separate data from Barclays, also published overnight, showed consumer spending on payment cards rose by 4.3% in April YoY.

The Halifax house price index unexpectedly fell by 0.3% in April month-on-month (MoM), after a 0.8% increase in March. The market had anticipated a 0.2% rise. Year-on-year, the index rose 0.1%, down from a 1.6% increase the previous month.

Currencies

The pound hit one-year highs against the US dollar yesterday. Many currency traders now consider that the greenback may have peaked, alongside Fed rates.

This week, a set of macroeconomic indicators are likely to have a great impact on the GBP/USD cross, starting tomorrow with consumer price index in the US. Economists expect the index at 5% in April YoY, the same pace of growth as in March. The pace of core CPI growth is forecast to slow to 5.5% YoY, from 5.6% the previous month. Anything higher than these expectations could force the US Federal Reserve to revise its latest stance on monetary policy.

BoE

On Thursday, the Bank of England (BoE) is set to decide on its interest rates. A majority of economists anticipate a 25-basis point (bp) hike that would take rates to 4.5%, a level not seen since October 2008.

And on Friday, we'll get the preliminary estimate of GDP growth rate in the UK for the first three months of the year. The market expects a 0.1% growth quarter-on-quarter (QoQ), equivalent to the one recorded for the last quarter of 2022, which confirmed that the UK economy had narrowly avoided recession.

Earnings

PayPal Holdings posted better-than-forecast earnings and sales last night after US market close. Yet, the stock fell by 5% as the fintech group cut its outlook. PayPal posted a profit of $1.17 per share on an adjusted basis, compared with 88 cents last year, and higher than the $1.10 anticipated. Revenue increased 10% to $7.04Bln.

But the group disappointed the market by cutting its adjusted operating margin forecast. It now sees a 100 basis point increase this year, compared with its earlier forecast of a 125-basis point growth. Lowering expenses has also always been a focal point for Paypal, and the group sees in artificial intelligence a strong ally for its future development. "We expect AI will enable us to meaningfully lower our costs for years to come," CEO Dan Schulman said, adding that "Paypal intends to use the technology to add features for both merchants and consumers on its platform".

We are now at the tailend of the US earnings season. Today, among the companies set to report, two stand out. Airbnb is scheduled to report after market close. Like other actors of the travel and tourism industry, Airbnb should have benefited from the strong growth in European travel as well as recovery in China. The Street forecasts earnings of 20 cents per share on revenue of $1.79Bln. During the same period a year ago, the group posted a loss of 3 cents per share on revenue of $1.51Bln.

Before that, Under Armour is set to report its quarterly figures around midday. Analysts forecast earnings of 15 cents per share on revenue of $1.36Bln. The same quarter a year ago, the group reported a loss of 1 cent. But more that top and bottom lines, inventories and margins are what really matters for investors. Three months ago despite earnings, sales and guidance being higher than anticipated, the stock fell on higher stocks and lower margins.

 

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Early Morning Call: Europe indices open marginally higher ahead of US CPI

US consumer price index is expected to rise by 5% in April on an annual basis, unchanged on last month.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Wednesday 10 May 2023 09:15

US CPI data

APAC equity markets fell overnight, following the lead of US indices, as investors await key US CPI data.

US consumer price index (CPI) is expected to rise by 5% in April on an annual basis, unchanged on last month. Core CPI, which excludes food and energy prices, is forecast to rise by 5.5% year-on-year (YoY), after 5.6% the previous month.

While hiking interest rates by 25 basis points (bp) last week, the Federal Reserve (Fed) changed the wording of its statement, signalling a higher probability for a pause in the tightening cycle in June. However, Fed chair, Jerome Powell, reiterated that any decision remains data-dependent.

Earnings

ASOS swung to a first half (H1) loss. The online retailer felt the squeeze on household budgets, but said it was confident of a return to profit in the second half and beyond. The group posted adjusted loss before tax of £87.4 million, compared to a profit of £14.8Mln in the same period last year.

JD Wetherspoon forecast record full-year (FY) sales and its annual profit to be closer to the top-end of market expectations. The company said like-for-like sales rose 9.1% in first three months of 2023 from pre-pandemic levels, and sales during the Easter week were the highest seen by the group.

Elsewhere in Europe, TUI expects "significantly" higher operating profit in 2023, helped by strong bookings for the summer. TUI's revenue reached €3.2 billion in the first quarter, compared to €2.1Bln a year ago. Underlying EBIT swung back to profit, at €88Mln, after a loss of €242Mln. The world's largest holiday company says bookings for the summer season are currently 13% ahead of last year.

In France, Credit Agricole doubled its net income to about €1,23Bln in the first quarter (Q1), beating expectations of €816Mln. FICC trading sales jumped 42%, outperforming its bigger French rival, BNP Paribas.

Dutch bank ABN Amro also beat analyst expectations with a 77% jump in first quarter net profit to €523 million, thanks to higher rates and lower costs.

Airbnb shares shed 11% in extended hours on Tuesday after posting disappointing earnings and expectations for the current quarter. The vacation rental booking company earned 18 cents per share in the first quarter, two cents lower the analysts' forecast. Revenue rose 20% to come broadly in line at $1.80Bln.

During the first three months of 2023, active listings increased by 18% YoY. However, if bookings rose 19% to 121.1million, they were lower than the 122.4 million expected. And the company also warned the market it forecast fewer bookings and lower average daily rates this quarter.

Walt Disney, the largest media company in the world, is due to report after market close. With Bob Iger Back at the helm, investors are curious to see what impact his return has had on the company's different divisions. The street expects earnings of 95 cents per share, to be compared with $1.08 for the same quarter a year ago. Revenue is anticipated to rise by 7.5% to $21.80Bln.

In February 2020, Iger decided to move on after 15 years as CEO of the the Walt Disney company. Another Bob, Bob Chapek, then chairman of Disney Parks, became the new CEO, but not for long. Last November, in a surprise move, Disney's board brought Iger out of retirement in an attempt to boost profits and put a cap on swelling spending at Disney Plus.

Disney's last earnings report beat estimates, thanks to its theme parks. But streaming services saw their first subscriber decline since launching at the end of 2019. Iger announced then the group was embarking on a significant transformation, announcing 7,000 job cuts as part of a strategy to reduce costs by $5.5Bln.

Commodities

US crude oil and gasoline inventories rose last week, according to the American Petroleum Institute. Crude stocks rose by about 3.6 million barrels last week. Gasoline inventories also rose by 400,000 barrels, but distillate stocks fell by 3.9 million barrels.

 

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Charting the Markets: 10 May

A technical analysis of the markets by IG's senior market analyst, Shaun Murison.

 

 

 

16 Candlestick Patterns Every Trader Should Know | IG US

 

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Early Morning Call: GBP/USD remains near one-year high ahead of BoE decision

The Bank of England is set to decide on its interest rates at noon UK time.

 Jeremy Naylor | Analyst, London | Publication date: Thursday 11 May 2023

China growth

China's economy grew faster than expected in the first quarter, by 4.5%, thanks to the lifting of Covid curbs. But at the same time, several indicators point to an uneven recovery. After three months of expansion, factory activity contracted again in April, while retail sales growth hit a two-year high.

The latest inflation data gives further indications that the world's second biggest economy is finding it difficult to shake off the Covid-induced damage. The consumer price index (CPI) in April rose 0.1% compared to the same month a year ago, the lowest rate since February 2021, slowing from the 0.7% annual gain recorded in March. Economists anticipated a 0.4% rise.

Producer deflation also deepened, falling at the fastest pace since May 2020. PPI declined 3.6% year-on-year (YoY) after a 2.5% drop the previous month, and lower than a forecast for a 3.2% fall. The NBS attributed the weaker consumer inflation to the base effect. Vegetable prices extended their decline to 13.5% and pork price growth slowed to 4.0% from 9.6% in March.

But the fact remains that CPI is still well below the government's ceiling of around 3%, which means there is ground for the People's Bank of China (PBoC) to either cut rates or release more liquidity into the financial system.

BoE

The Bank of England (BoE) is set to decide on its interest rates at noon UK time. Investors are fully pricing in the 12th straight hike of 25 basis points (bp) that would take the rate to 4.5%, a level not seen since October 2008.

If there is no doubt about today's decision, the market will be looking for clues on the likelihood of further rises in the months ahead. Earlier this month, a Reuters poll showed most economists expected a pause at 4.5% for the remainder of the year. Most but not all.

This week, Goldman Sachs said it was now forecasting rates to peak at 5% in August. As recession fears are moving away, it gives a bit more room for the BoE to continue its fight against inflation, which stubbornly remains above 10%, more than five times the bank's target.

Equities

ITV released a trading statement saying that total external revenue fell 7% to £776 million. Total studio revenue was flat at £457Mln.

Rolls-Royce said its performance year-to-date was in line with expectations. Supply chain management remained a key operational challenge for the Aircraft engine maker.

In Germany, Thyssenkrupp posted a second quarter (Q2) net loss of €223Mln due to impairment losses at its Steel Europe division.

Deutsche Telekom saw its adjusted EBITDA rise 0.9% in the first quarter to €10 billion, beating expectations. The group now expects EBITDA to reach €40.9Bln in 2023, €100 million more than its previous forecast.

Bayer's EBITDA fell 14.9% to €4.47Bln in the first quarter. The group said its 2023 results would likely come in at the lower bound of its target range.

Disney shares fell in extended trading on Wednesday after the release of its quarterly report. Earnings came in at 93 cents per share and revenue at $21.82Bln, both lines broadly aligned with forecasts.

But the group's streaming business, Disney Plus, caught the eye. Last November, Bob Iger was brought back by the board, with a main mission: put a cap on swelling spending at Disney Plus. With the help of a price increase and reduced marketing expenses, Iger managed to reduce Disney Plus losses by $400Mln compared to the last three months of 2022, ending the quarter with an operating loss of $659Mln.

But the division also lost subscribers for the second straight month, down four million to 157.8 million. Most subscriber losses came from India after Disney lost streaming rights to IPL cricket matches. Disney also shed 300,000 customers in the United States and Canada, where it raised prices last December.

This a blow for investors who expected Disney Plus would add more than a million customers in the quarter. Disney plans to launch a new app that combines Disney+ and Hulu, and with it, Iger wants to open more opportunities for advertisers. And an ad-supported option also will be added to Disney+ in Europe by year's end. Three months ago, Iger vowed to reduce costs by $5.5 billion, partly through 7,000 job cuts. He said yesterday that this target would be exceeded.

 

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This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.

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For more up to date news on how markets will open, the latest earnings and economic news, watch IGTV live in the platform at 07:30am UK.

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Today’s coverage:

Indices: Small gains in Europe at the start, in a down week overall

FX:GBP awaiting UK GDP after BoE’s assessment that the economy s stronger than thought

Equities: Earnings – ALV GLE. GSK sells down some of its 13% holding in HLN 

Commods: Base metals down as Q2 demand not picking up as hoped. Oil & gold both down for a 3rd day. Coffee Robusta down heavily after new 12yr high 

 

 

 

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Early Morning Call: UK economy expands 0.1% in Q1 despite unexpected drop in March

The UK economy expanded 0.1% in the first quarter compared to the last three months of 2022, in line with expectations.

 Jeremy Naylor | Analyst, London | Publication date: Friday 12 May 2023 09:08

UK economy

The UK economy expanded 0.1% in the first quarter (Q1) compared to the last three months of 2022, in line with expectations. March data, however, raised eyebrows. Monthly gross domestic product (GDP) unexpectedly shrank 0.3% compared to February. UK industrial production fell 2% in March year-on-year (YoY), less that the 2.9% drop expected by economists.

Equities

On the equity market, pharmaceutical giant GlaxoSmithKline (GSK) said after the market closed on Thursday that it planned to sell as much as £823 million worth of shares in Haleon, the consumer healthcare division it spun off as a separate company last year. GSK will sell as many as 240 million shares, equivalent to 2.5% of Haleon's total, through a placing to institutional investors. GSK's current stake is just under 13%.

Societe Generale posted better-than-expected quarterly earnings. France's third-biggest bank's net income rose 5.7% from a year earlier to €868Mln, almost double the average of four analyst estimates compiled by Refinitiv, driven by a strong FICC trading performance, up 16%.

Like Credit Agricole on Wednesday, Soc Gen FICC trading gains surpassed the ones of larger competitors like Deutsche Bank, Goldman Sachs and BNP Paribas. The company also more than offset the 11% income drop of its retail division. Group revenue was down 5.3% to about €6.7 billion, and Societe Generale maintained its 2025 financial targets.

In Germany, Allianz' quarterly profit jumped 329% to €2.03Bln. This marks a return to business as usual for the Germany insurer. Last year's performance was hampered by $6Bln worth of settlements and fines linked to Allianz Global Investors, one of the group's funds involved in a fraud case in the United States. The figure, however, fell short of a €2.327Bln consensus forecast.

Commodities

The second quarter is traditionally a peak demand season for industrial metals in China, but demand this year has remained subdued. Uneven recovery, a sluggish export market, and a rise in supplies in the market are weighing on copper prices, now at the lowest level in 2023 and heading for the biggest weekly drop since November.

Other metals are also affected. Zinc just broke January 2021 support and trades a two-and-a-half year low. Aluminium is now at its lowest level since October 2022.

Oil prices trade lower this Friday and are poised to record a fourth straight week of declines. The new round of oil output cuts announced early April by some members of OPEC+ has failed to boost oil prices. Instead, these have been hit by interest rate hikes and concern over the US debt ceiling.

Yesterday, OPEC kept its global oil demand forecast for 2023 virtually unchanged. World oil demand in 2023 will rise by 2.33 million barrels per day, or 2.3%.

Last week the Baker Hughes total rig count fell by seven to 748. The number of oil rigs in operation fell to 588 from 591.

 

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Early Morning Call: Japan's Nikkei 225 rises to new 18-month high

Japan Nikkei 225 rose to a new 18-month high, boosted by upbeat corporate reports and a weaker yen.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 15 May 2023 

Indices overview

Friday was a negative session in the US, which meant that the Dow Jones and S&P 500 recorded a second straight week of losses.

Overnight equity market performance in APAC was mixed. Japan's Nikkei 225 rose to a new 18-month high, boosted by upbeat corporate reports and a weaker yen.

In Australia, gold miner Newcrest Mining says it will back Newmont's takeover offer. If approved by shareholders, the $17.8 billion deal would make Newmont the largest gold and copper producer in the US.

Macroeconomics

There is very little on the macroeconomic calendar this Monday.

In Japan, producer price index (PPI) rose by 5.8% in April year-on-year (YoY), slowing for a fourth straight month, an indication that consumer inflation should start to ease in the coming months. In March the index rose 7.4%.

At 10am, industrial production in the eurozone is forecast to fall 1.8% in March month-on-month (MoM), after a 1.5% increase the previous month.

Tomorrow, the market expects to know more about the Reserve Bank of Australia's (RBA) unexpected decision to raise rates at its last meeting. After an 11th rate hike in the last twelve months, the main rate now stands at 3.85%, as the Australian central bank is concerned that current inflation in the country is still too high.

Also tomorrow, focus will be on China retail sales for the month of March, eurozone GDP's growth rate in Q1, and Germany's ZEW economic sentiment for May. Economists anticipate a third straight month of decline of ZEW indicator to -5.5, from 4.1% the previous month. that would take it at its lowest level this year.

Later this week the market awaits first estimate of Japan's GDP for the first quarter (Q1) on Wednesday, and UK GFK consumer confidence on Friday.

Equities

Currys this morning unveiled a 7% drop in like for like sales for the full year (FY), but upwardly revised its full year earnings expectations, to between £110- and £120 million. Currys’ previous forecast was for £104Mln.

There is more to come in terms of earnings reports in the UK throughout the week. On Tuesday, we expect H1 earnings from Imperial Brands, Vodafone FY, and a trading statement from Greggs.

On the menu on Thursday: easyJet, BT Group, Burberry, and International Distribution Services, that's the old Royal Mail Group.

US earnings season is almost over, with just a few big names expected to report in the coming days, starting on Tuesday with Home Depot, followed by Cisco and Target on Wednesday.

And on Thursday Walmart and Applied Materials report. Home Depot, Target, and Walmart, some of the biggest names in the US retail sector, report earnings in a very challenging period of still high inflation. On one hand retailers are trying to pass on higher costs to their customers, on the other, shoppers are looking for ways to limit spending.

Walmart earnings expectations illustrate the tricky situation retailers are trying to handle. Revenue is anticipated to rise 5% to $148.50Bln, reflecting that rise in cost. But the Street expects earnings at $1.30 per share, which means a decline in profit margin.

Commodities

Oil prices traded lower on Monday, after recording a fourth weekly decline last week.

On Friday, Baker Hughes total rig count fell by 17 to 731. This was mainly due to a decline in working gas rigs. The number of oil rigs in operation fell by only two to 586.

 

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Charting the Markets: 15 May

FTSE 100, DAX 40 and Dow rise on US debt ceiling optimism. EUR/USD and EUR/GBP stabilise while USD/JPY rises on US debt ceiling optimism. And gold holds steady and oil drops, while orange juice pullback slows.

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 15 May 2023 

 

 

 

 

 

16 Candlestick Patterns Every Trader Should Know | IG US

 

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Look Ahead to 16/5/23: RBA minutes; China retail; ZEW; UK jobless; Vodafone

Tuesday is all about growth, inflation, and the consumer when we get minutes from the Reserve Bank of Australia, China retail sales, the ZEW, jobless data from the UK, and results from Vodafone and Home Depot.

Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 15 May 2023

 

 

 

 

 

 

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Early Morning Call: GBP slides after unemployment rate unexpectedly rises

In the UK, the unemployment rate unexpectedly rose to 3.9% in March from 3.8% in February.

 Jeremy Naylor | Analyst, London | Publication date: Tuesday 16 May 2023 

RBA minutes

At its last meeting the Reserve Bank of Australia (RBA) decided to hike its cash rate by 25 basis points to 3.85%, an unexpected decision the bank justified by persistent high inflation in the services sector and pressure from weak productivity growth.

The minutes of the RBA show that board members also considered a pause. "In weighing up the two options, members recognised that the arguments were finely balanced but judged it appropriate to increase interest rates at his meeting," the minutes said. "Members also agreed that further increases in interest rates may still be required, but that this would depend on how the economy and inflation evolve."

At the moment, markets are pricing an 85% chance of a pause in June, while seeing a higher risk of a hike in August or September. A consequence of the last RBA rate hike, Westpac consumer confidence took a hit in May. The index fell to 79, from 85.8 in April. In the statement accompanying the data, Westpac chief economist Bill Evans said "the two key developments over the last month have been the surprise decision by the Reserve Bank Board to lift the cash rate in May and the Federal Budget."

China recovery

Is Chinese economic recovery losing momentum? The latest set of macroeconomic data is certainly adding pressure on policymakers. Industrial production rose 5.6% in April year-on-year (YoY), accelerating from the 3.9% pace seen in March, but missing expectations of 10.9%.

Retail sales also accelerated in April. The index increased by 18.4% in April YoY after a 10.0% rise in March, also below expectations for 21%. Expectations seem high but they are skewed by heavy declines in April 2022 when major cities including Shanghai were placed under stringent Covid-19 lockdowns. Fixed asset investment increased by 4.7% in the first four months of the year compared to the same period in 2022, undershooting a consensus of 5.5%.

Investment in the property sector, a key pillar of the economy, tumbled 16.2% year-on-year last month after a 7.2% drop in March. What does it mean for interest rates? China's central bank kept the interest rate unchanged for an eighth straight month on Monday, but markets are now betting on more monetary easing in the coming months.

Macroeconomics

In the UK, the unemployment rate unexpectedly rose to 3.9% in March from 3.8% in February. The April claimant count rose to 46.700 from 26,500 the previous month.

The market awaits the second estimate of eurozone first quarter (Q1) gross domestic product (GDP) growth rate. Economists anticipate the euro area economy to have expanded by 0.1% quarter-on-quarter (QoQ).

Germany ZEW economic sentiment is forecast to fall for a third straight month to -5.5, which would set a new low for the year.

In the US, the market awaits retail sales for the month of April. Economists see a 0.7% rise month-on-month (MoM). Industrial production is expected to stay flat in April MoM, and NAHB housing market index is anticipated to remain at 45 in May.

Equities

New Vodafone boss Margherita Della Valle wants to cut 11,000 jobs over three years as the telecoms group "must change". Vodafone’s EBITDAAL fell 1.3% to €14.7 billion, while revenue rose 0.3%. The group forecasts little or no growth in earnings for the new financial year.

Imperial Brands reports a rise in half-yearly profit. Operating profit rose to £1.53Bln from £1.2 billion a year earlier. The dividend was up 1.5% to 43.18 pence and the tobacco firm says it is on track to complete its £1Bln share buyback programme.

Sales continue to grow at Greggs. Like-for-like sales rose 17.1% in the first 19 weeks of the year. Total sales reached €609 million, after €495Mln a year ago. Greggs kept its full-year guidance unchanged.

In the US, Home Depot will kickstart retailers’ earnings this week. The market expects a tough start of the year for the home improvement company. High inflation has forced consumers to restrict spending and favour essentials such as food and energy. As a result, more homeowners have chosen to delay renovation projects.

Earlier this year Home Depot warned it expected earnings to fall by a mid-digit percentage this year, and sales to be broadly flat. For the first three months of the year, analysts expect earnings to fall by around 7% to $3.87 per share. Revenue should come it at $38.60Bln, to be compared with $38.91Bln during the same quarter a year ago.

 

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For more up to date news on how markets will open, the latest earnings and economic news, watch IGTV live in the platform at 07:30am UK.

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Today’s coverage:

Indices: European mkts expected higher, Dax breaks to 16mth high following gains across Asia and on Wall St

FX: AUD under pressure following Aussie jobs data AUDNZD 6mth lows

Equities: Earnings: BT EZJ BRBY IDS NGG PFD WMT. Last night CSCO dropped to 6mth lows after more supply chain issues

Commods: Gold down again nearing close support at $1969. Oil holding Wednesday’s gains 

 

 

 

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Early Morning Call: easyJet posts H1 loss, but remains confident for 2023

easyJet posted a first-half loss before tax of £411 million, in line with its guidance.

 Jeremy Naylor | Analyst, London | Publication date: Thursday 18 May 2023 

APAC overview

The Nikkei 225 rally continues, despite concerns around the latest Japan trade data. Trade deficit narrowed, but only because imports declined. Economists are concerned that export growth was the weakest it's been in more than two years, as shipments to China, its largest trading partner, fell in April. Weakening exports will put a drag on capital spending, which may sap domestic demand.

Yesterday's better-than forecast growth data was underpinned by a rise in domestic demand. Capital expenditure was also up, but a drop in net exports shaved 0.3 percentage point off of gross domestic product (GDP).

Australian employment unexpectedly fell in April. A drop in full-time employment led to a fall in the overall employment number by 4,300, and a rise of the rate to 3.7%. This follows two months of outsized gains which kept the unemployment rate near 50-year low. Is that a sign the labour market is cooling? The market certainly thinks so, and is now betting on a rate pause next month, but still pricing a rate hike in August or September. This translated into a move lower for the Australian dollar.

The Reserve Bank of Australia's (RBA) tightening campaign has already resulted in a 375-basis point (bp) hike to 3.85%.

Earnings

easyJet posted a first-half (H1) loss before tax of £411 million, in line with its guidance. The airline company is confident about the summer season and expects a profit before tax of at least £80Mln in 2023.

BT profit before tax fell 12% but maintained its full-year dividend at 7p per share.

Burberry maintained its medium-term target after posting adjusted operating profit up 8%.

Cisco Systems beat top and bottom line expectations in its fiscal third quarter, but investors are worried about persistent supply chain constraints. Earnings came in at $1 per share, up 15% from a year earlier, on revenues of $14.6 billion, up 14%, including acquisitions. Analysts expected Cisco earnings of 97 cents a share on sales of $14.40Bln.

The market was waiting for an update on the group's backlog, and it appears that in three months there has not been much improvement. In February investors were worried about the health of the backlog. Supply chain restrictions tend to lead to a decline in orders of new products, and this is exactly what happened here. Cisco's product orders fell 23% in the third quarter.

For the full-year, Cisco forecasts modest revenue growth, between 10 and 10.5%, and expects to end the fiscal year with roughly double its normal product backlog.

Watch out for Micron Technology shares at the open of the IG all-session market at 9am. The stock reacted positively around midnight to the announcement that it plans to invest up to ¥500Bln, that's $3.70Bln, in extreme ultraviolet technology. Micron will get support from the Japanese government to become the first semiconductor company to bring EUV technology to Japan for production. EUV is currently the most advanced technology used in the fabrication of semiconductors.

After Home Depot and Target, it is Walmart's turn at lunchtime today to release its quarterly figures. Earnings expectations illustrate the tricky situation that retailers are trying to handle. Revenue is anticipated to rise 5% to $148.50Bln, reflecting that rise in cost. But the Street expects earnings at $1.30 per share, which means a decline in profit margin.

This week, both Home Depot and Target have described a fragile consumer as higher rates and energy costs have been soaking up any surplus funds. On one hand, retailers are trying to pass on higher costs to their customers, on the other, shoppers are looking for ways to limit spending.

 

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Charting the Markets: 18 May

Dow, Nasdaq 100 and CAC40 higher in early trading. EUR/USD, EUR/GBP and GBP/USD near support amid optimism around US debt ceiling. And WTI rallies, gold falls on US debt ceiling optimism while orange juice holds on to gains.

Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 18 May 2023 

 

 

 

 

 

 

 

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Early Morning Call: Equity markets, currencies hesitant while US debt ceiling talks resume

Equity markets started the week on the front foot in Asia.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 22 May 2023 

Equity market overview

Equity markets started the week on the front foot in Asia. Japan’s Nikkei traded above 31,000 points, for the first time since August 1990. The Hang Seng and China mainland indices also trader higher.

PBoC

As expected, the People'a Bank of China (PBoC) kept its benchmark lending rates unchanged for the ninth straight month. China's one-year loan prime rate (LPR) stayed at 3.65% and its five-year LPR remained at 4.30%. In a Reuters poll of 26 market watchers conducted last week, 23 predicted no change. But now some economists would like to see some easing measures.

Over the past month, a series of macroeconomic data showed the country's recovery could be losing momentum. NBS and Caixin manufacturing PMI fell back below 50, imports shrank by nearly 8% last month, and last week’s data showed that industrial production, retail sales and fixed asset investments all missed expectations.

In Europe, indices are hardly changed at open, as investors expect debt ceiling talks to resume, less than two weeks before the June 1 deadline after which Treasury expects the federal government will struggle to pay its debts.

Earnings

After the €355 million of last year, Ryanair this morning posted a €1.43 billion profit, a near record. The low-cost carrier flew a record 168.6 million passengers in the year through March 31, nearly 20 million more than its previous annual record reached before the pandemic.

For the next 12 months, Ryanair is optimistic but cautious. It is optimistic because it sees robust demand for the summer. And cautious as recent Boeing delivery delays may slightly affect the group's growth targets. Ryanair stuck to its after-tax profit forecast for the current year, forecasts it raised in January after stronger than expected Christmas traffic and fares.

Tech

There is a new episode in the tech feud that opposes the US and China. The Cyberspace Administration of China (CAC) announced yesterday that some of Micron Technology products have failed its security review. According to the regulator, "the review found that Micron's products have serious network security risks, which pose significant security risks to China's critical information infrastructure supply chain, affecting China's national security."

No further details were provided by the CAC, but it said it would stop Chinese operators from buying from the company.

Even though it doesn't look as dramatic as the sheer drop that started in October 2020, Zoom Video Communications stock has lost another 40% over the past twelve months. It is now back to levels of a time when the word Covid wasn't familiar to the vast majority of us.

Zoom's future looks very challenging with the arrival of AI. Its main competitors already have a plan to make use of artificial intelligence. A couple of months ago, Microsoft said it would integrate ChatGPT into its video software Teams. A year ago, Alphabet was already talking of implementing AI-powered innovation in Google Workspace.

To have a chance to compete, Zoom would need to drastically increase its R&D spending. Microsoft R&D spending reached $7Bln last quarter. Google spent $11.5Bln while Zoom's R&D spend was $193Mln.

The Street expects Zoom earnings to fall about 5% to 99 cents per share. Revenue is anticipated to rise by less than 1% to $1.08Bln, which would be the slowest pace of sales growth in Zoom's history.

NVIDIA is set to report first quarter (Q1) earnings on Wednesday after the closing bell. The street anticipates earnings of 92 cents per share, a 32% drop compared to Q1 2022. Revenue is also expected to fall, by 21% to $6.52Bln.

Earlier this year NVIDIA launched a new processor, a new graphic card. Alphabet also revealed earlier this month that NVIDIA H100 GPUs would in part power its AI purpose-built A3 supercomputers.

NVIDIA stock has more than doubled since the beginning of the year and is closing in on its all-time high set in November 2021. But will it get there? Some investors are now worry the group will not be able to sustain this steep trend. One figure illustrates these concerns. NVIDIA's ROCE, the Return on Capital Employed, has fallen from 32% five years ago to 16%. It remains above a ROCE average of 16% in the sector, but nonetheless points to diminishing returns.

On Thursday, the market awaits reports from several actors of the US retail sector: Gap, Dollar Tree, Costco Wholesale and Best Buy.

Last week, Walmart, Target, and Home Depot gave us a good idea of their customers' behaviour, in a context of high inflation and interest rates which are now at their highest levels since September 2007.

Walmart and Target both said sales trends in the US are getting worse. Shoppers spent less especially on discretionary goods. DIY giant Home Depot saw a 4.6% decline in sales in the first three months of 2023, with March being the weakest month of the quarter. This is a worrying trend if we consider that spring is peak season for home improvement.

 

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Look Ahead to 23/5/23: US debt ceiling; new home sales; UK public sector net borrowing; Topps Tiles results

Investors eye the outcome of US debt ceiling talks and new home sales figures are expected to point to a nascent housing recovery.

In the UK, lower-than-expected government borrowing could point to future budget leeway. Plus, Topps Tiles reports H1 earnings.

 

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 22 May 2023

 

 

 

 

 

 

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Early Morning Call: prices at UK supermarkets, retail chains reach record high in April

The British Retail Consortium says prices in UK supermarkets and retail chains rose 9% in the year to May, the highest rate since industry records began in 2005.

 Jeremy Naylor | Analyst, London | Publication date: Tuesday 30 May 2023 

US debt ceiling

Equity markets were mixed in APAC overnight, as the US debt ceiling deadline approaches. President Joe Biden and his Republican opponents have announced they have agreed in principle to raise the US debt ceiling and avert a default. The president described the agreement as a "compromise", while House Speaker Kevin McCarthy said it "was worthy of the American people". A vote is now expected in Wednesday, taking the whole issue down to the wire.

UK price inflation

According to the British Retail Consortium (BRC), prices in UK supermarkets and retail chains rose 9% in the year to May, the highest rate since industry records began in 2005. That said, the survey shows that food price inflation slowed to 15.4% from 15.7%, largely driven by lower energy and commodity costs.

While there is reason to believe that food inflation might be peaking, BRC chief executive Helen Dickinson warned that "it is vital that government does not hamper this early progress by piling more costs onto retailers and forcing up the cost of goods even further. The biggest risk comes from policies such as the incoming border checks and reforms to packaging recycling fees.

"Earlier this weekend, the Daily Telegraph reported the British government is looking at plans to have retailers cap the prices of basic food items. According to the newspaper, Downing Street is in talks with supermarkets on a deal similar to one in France where major retailers charge the 'lowest possible amount'".

This is not to the taste of the BRC which urged the government to simplify rules "rather than recreating 1970s-style price controls."

Eurozone economic sentiment

Later this morning the market awaits May economic sentiment in the eurozone. The index is forecast to fall to 98.9, from 99.3 in April. We'll also get the final reading on consumer confidence.

In the US, S&P/Case-Shiller home prices are expected to fall in March. And CB consumer confidence is forecast at 99 in May, down from the 101.3 recorded in March.

Earnings

Last week, NVIDIA reported a massive earnings and revenue beat and pleased traders with a stronger-than-anticipated forecast. This was driven mainly by optimism stemming from the company's leading position in the market for AI chips. Yesterday, NVIDIA announced it was building Israel's most powerful AI supercomputer and the numbers are astonishing. The system, called Israel-1, is expected to deliver the performance of up to eight exaflops of AI computing.

What is an exaflop you ask? Well, that's a good question. One exaflop has the ability to perform one billion billion calculations per second. The system will cost hundreds of millions of dollars and be partly operational by the end of 2023.

HP is expected to report its fiscal second quarter (Q2) earnings and revenue after tonight's US closing bell. The Street forecasts earnings of 76 cents per share, which would be a drop of about 29% from the same quarter a year ago. Revenue is expected to decline by 21% year-on-year (YoY) to just over $13 billion, a performance that reflects the continuing fall in PC demand.

The personal computer and printer maker's shares have lost about 13% of their value over the past 12 months. But so far this year they have gained about 15% thanks to two consecutive better-than-expected quarterly reports.

Its spin-off company Hewlett Packard Enterprise (HPE) has had a very different fate over the past 12 months. Broadly unchanged over the period, the stock has lost around 7% in the last five months, despite beating estimates and raising forecasts three months ago.

HPE is also releasing its quarterly earnings tonight. Analysts anticipate a 9% rise in its earnings per share to 49 cents. Revenue is also expected to rise by 7% to $7.31Bln.

 

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Charting the Markets: 30 May

FTSE 100 lower while DAX moves higher in early trading, and Dow looks to edge up following reports of debt ceiling deal. EUR/USD declining and USD/JPY holding firm, while GBP/USD begins to show signs of a higher low.

Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 30 May 2023 

Gold’s pullback slows down, while Brent crude turns lower and natural gas struggles to hold the 50-day MA.

 

 

 

 

 

 

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Look ahead to 31/5/23: China PMI; France GDP; Germany CPI

Economic data is key on Wednesday. It starts in Japan with retail sales, followed by Chinese PMI.

 Jeremy Naylor | Analyst, London | Publication date: Tuesday 30 May 2023 

IGTV’s Jeremy Naylor looks at the chances that the Chinese yuan will weaken further as it becomes more and more obvious that the recovery in China is further away than initially expected.

Then in the eurozone we’re looking at the CAC 40 and DAX as growth and inflation data is released.

The only corporate on the schedule is from stationers, WH Smith.

 

 

 

 

 

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Early Morning Call: British Land to leave FTSE 100, replaced by IMI

Property developer British Land lost its position on the index, ending a 21-year run in the FTSE 100.

 Jeremy Naylor | Analyst, London | Publication date: Thursday 01 June 2023 

US debt ceiling

The US debt ceiling bill passed its first hurdle last night in the US House of Representatives. A coalition of Democrats and moderate Republicans overcame an opposition led by hardline conservatives. The House voted 314-117 to send the legislation to the Senate. Now the bill has to pass the Senate to be signed into law.

China factory activity

China's factory activity unexpectedly swung to growth in May, according to the Caixin survey, which covers small and medium-sized enterprises. This was a surprise after the official NBS survey showed yesterday that the manufacturing sector contracted faster than expected. The official NBS PMI survey covers large and state-owned companies.

The Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 50.9 in May from 49.5 in April, above the 50-point index mark that separates growth from contraction. However, business confidence for the coming 12 months fell to a seven-month low.

EU CPI

In the eurozone, headline consumer price index (CPI) is expected to fall to 6.3% in May year-on-year (YoY), from 7% in April. Since its October 2022 peak, CPI has almost constantly declined, but remains more than three times above the European Central Bank (ECB) target.

Core CPI, which excludes energy, food, alcohol and tobacco prices, is forecast to decline for a second straight month to 5.5%, from 5.6% in April, which suggests that, now that last year's higher energy prices are being phased out, EU consumers face stickier than expected broad-based inflation.

In the US, it was also a shorter week, as Americans celebrated Memorial Day on Monday, which means the ADP employment change will exceptionally take place this afternoon at 1.15pm. The markets expect 170,000 job creations in the US private sector, fewer than the 296,000 recorded the previous month.

Also, at 3pm the market awaits ISM manufacturing PMI which should marginally fall to 47 in May, from 47.1 in April. This would mean a seventh straight month of contraction for the US manufacturing sector.

FTSE reshuffle

The quarterly reshuffle of the FTSE indices is upon us again and was confirmed last night. Property developer British Land lost its position on the index, ending a 21-year run in the FTSE 100. Its value has been hit by rising interest rates and the disruption caused by last autumn's mini budget. The swap brings engineering company IMI into the FTSE 100.

The reshuffle will take effect from the start of trading on Monday 19 June.

Earnings

British boot maker Dr. Martens posted a drop in its annual profit. Profit before tax slumped 26% to £159.4 million dented by supply chain issues that ramped up operational costs. Revenue rose 10% to £1 billion. The group proposes a total dividend of 5.84 pence, up 6% on last year.

In the US, Broadcom is due to report second quarter (Q2) numbers after the market close. The street anticipates earnings of $10.12 per share on revenue of $8.7Bln.

After NVIDIA's earnings report last week and its market capitalisation reaching $1 trillion, investors now look at how every semiconductor maker could benefit from the AI boom. And according to some analysts, Broadcom is underestimated among its peers. Its networking segment is said to present significant opportunities in the AI space.

Like other chip makers, Broadcom stock jumped in the past few days, taking it to an all-time high.

 

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Charting the Markets: 1 June

Dow and CAC40 stabilise while Nasdaq 100 edges down. EUR/USD, EUR/GBP and USD/CAD stabilise as US debt ceiling bill goes to Senate. And Brent, orange juice stabilise while copper advances as US debt ceiling bill gets signed.

Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 01 June 2023

 

 

 

 

 

 

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Look ahead to 2/6/23: US jobs; Baker Hughes rig count

After the stronger than expected private payrolls number from ADP, risks would seem to be on the upside for the US non-farm jobs number on Friday.

 Jeremy Naylor | Analyst, London | Publication date: Thursday 01 June 2023 

IGTV’s Jeremy Naylor looks at USD/JPY as a potential trade. Outside of this watch Brent around the Baker Hughes rig count.

 

 

 

 

 

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Early Morning Call: all eyes on NFP report after US debt ceiling bill passed

The market expects 190,000 job creations for the month of May.

 Jeremy Naylor | Analyst, London | Publication date: Friday 02 June 2023 09:07

NFPs

As the US debt ceiling bill passed the Senate overnight, investors and traders now await the US job report. The market expects 190,000 job creations for the month of May. The unemployment rate is seen rising one notch to 3.5%.

Yesterday's private payrolls number largely beat forecasts, showing 278,000 jobs opened in May. Forecasts had been for 170,000.

Earnings

Broadcom released better-than-forecast earnings yesterday evening. Adjusted earnings per share (EPS) came in at $10.32 per share, 20 cents higher than expectations. Revenue was also marginally higher than expectations, up 8% to $8.73 billion.

Shares however fell 2% in after-hours trading. It seems that investors were somehow disappointed by the chipmaker's forecasts, even though it sees third quarter (Q3) revenue of about $8.85 billion, higher than the $8.72Bln expected by analysts. These expectations come a week after NVIDIA said it expected revenue for the current quarter more than 50% above Wall Street estimates.

As is the case for NVIDIA, artificial intelligence (AI) is rapidly becoming an important part of Broadcom's business, and now represents about 15% of its semiconductor business, up from 10% in 2022. Broadcom's CEO believes it will account for more than 25% of the company's semiconductor revenue in 2024.

After-hours trading was also choppy for Dell. Shares fell 2% after the bell, reversing gains of 5%. The stock was even briefly halted during regular trading hours when the company announced results earlier than scheduled, which smashed Wall Street's estimates for its fiscal second quarter (Q2) earnings. It published an adjusted $1.31 a share on sales of $20.90 billion in the quarter, versus analysts expectations of earnings of 86 cents a share on sales of $20.30 billion.

However, this meant that year-over-year (YoY) Dell earnings dropped 29% on a 20% drop in sales. Dell's Infrastructure Solutions Group, the unit that sells servers, storage and networking gear, reported an 18% drop in sales to $7.6 billion.

Meanwhile, the company's Client Solutions Group, the division which sells desktop and notebook PCs, posted a 23% drop in sales to $12 billion. With demand slumping, PC makers now face a pile-up in inventory amid an uncertain economic outlook.

Commodities

There's yet more evidence that crude oil continues to build. US crude oil stockpiles rose unexpectedly last week by 4.5 million barrels. Analysts in a Reuters poll foresaw a 1.4-million-barrel drop.

Gasoline stocks fell by 200,000 barrels, distillate stockpiles rose by nearly 1 million barrels in the week. Last Friday, Baker Hughes total rig count fell by nine to 711. The number of oil rigs in operation fell to 570 from 575.

OPEC+ ministers meet this weekend, and so far, four sources told Reuters that the alliance was unlikely to deepen supply cuts. In a surprise announcement last April, OPEC+ brought total output cuts to 3.66 million barrels per day, or about 4% of global consumption. This sent Brent about $9 higher to above $87 over the days that followed, but Brent has since lost those gains to trade below $73.

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Charting the Markets: 2 June

Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance.

Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023

 

 

 

 

 

 

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Early Morning Call: oil prices rise after more voluntary cuts following OPEC+ meeting

At this weekend's OPEC+ meeting, members decided to extend the existing production cuts. On top of this deal, Saudi Arabia will make a deep cut to its output.

 Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 05 June 2023 09:17

Indices overview

On Friday, stronger-than-expected non-farm payrolls (NFP) gave a boost to US and European stocks. The S&P 500 was a whisker away from breaking 10-month resistance.

According to the report 339,000 jobs were created in May, beating market expectations of 190,000. April job creations were also revised upwardly to 294,000.

On Monday, APAC indices mostly rose, following the lead of US and Europe equity markets.

OPEC+ oil cuts

At this weekend's OPEC+ meeting, members decided to extend the existing production cuts. In April, the organisation put in place cuts of 3.66 million barrels per day (bpd): 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd. These were in place until the end of this year. They now have been extended until the end of 2024.

On top of this deal, Saudi Arabia will make a deep cut to its output. "The ice on the cake. A Saudi Lollipop", as described by the Saudi Energy Minister Prince Abdulaziz bin Salman. The country's output will drop to nine million barrels per day in July from around 10 million bpd in May.

Saudi Arabia only has one objective in mind, lifting prices. It needs prices at $81 if it wants to break-even in 2023. This decision to go solo highlights the tensions between countries in the organisation. Saudi Arabia is clearly annoyed that Russia is feeding the market with cheap oil.

After the last OPEC+ meeting in April, Brent jumped by around $9, but prices have since retreated since. When oil markets reopened on Monday, Brent immediately rose as high as $78.68, but has since deflated.

Macro overview

China's Caixin/S&P Global services PMI rose for a fifth straight month to 57.1 in May. As was the case for the manufacturing sector, the private sector survey contrasts with the official PMI released last week. It also remained in expansion territory but slowed on the previous month.

The Caixin/S&P's composite PMI, which includes both manufacturing and services activity, rose to 55.6 highest since December 2020.

German exports rose unexpectedly in April, increasing by 1.2% on the previous month. A Reuters poll had predicted a month-on-month (MoM) decline of 2.5%.

Exports were boosted by deliveries to China following its reopening. Exports to China were up 10.1%, the office said. Imports fell by 1.7% compared with March, versus analysts' expectations for a 1.0% fall.

A few more indicators are expected today. In the eurozone, producer price index is expected to fall by 3.1% in April MoM, and rise by only 1.4% on a year-on-year (YoY) basis, after 5.9% the previous month.

In the US, ISM services PMI is expected at 3pm, and is forecast to rise to 52.3 in May, after 51.9 in April. And factory orders: the market sees a 0.8% increase in April MoM.

Central banks

Currency traders await two central bank decisions this week. On Tuesday the Reserve Bank of Australia (RBA) is expected to keep key interest rates unchanged at 3.85%, after an unexpected 25 basis point increase last month.

And on Wednesday, the Bank of Canada (BoC) is also expected to stay put at 4.5%. The Australian dollar is roughly back to where it was at the time of the RBA's last decision, on 2nd May. The RBA board was divided but eventually decided to hike its cash rate as inflation remains too high and the unemployment rate is at its lowest point in nearly half a century. Economists polled by Reuters economists published last Friday expect the RBA cash rate to reach 4.1% by end of the third quarter (Q3).

As for USD/CAD, trading has been fairly choppy since the BoC's last decision is April.

Equities

Elsewhere on the equity market, a study lead by Yale University that involved 700 patients for three years concluded that AstraZeneca's lung cancer drug Tagrisso cuts the risk of death by more than half. This only concerns patients with a certain form of lung cancer who were diagnosed early enough to have their tumour surgically removed.

Tagrisso is already the crown jewel in AstraZeneca's portfolio, raking in $5.4 billion last year.

Investors are waiting for a few earnings reports this week, starting tomorrow with Ferguson and British American Tobacco. On Thursday we'll get reports from Crest Nicholson, First Group and Mitie.

 

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Charting the Markets: 05 June

Indices remain bid amid risk-on sentiment. EUR/USD, GBP/USD resume their descents on greenback strength while EUR/GBP rallies. And Gold prices fall back and oil prices rally, while live cattle prices sit at a record high.

Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 05 June 2023

 

 

 

 

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Look Ahead to 6/6/23: RBA interest rate decision; UK retail sales; British American Tobacco

Australia’s central bank is likely to keep rates at 3.85% in June, but may raise again soon as inflation remains uncomfortably high. More data is likely to show cost of living pressures continue to weigh on the British consumer.

Plus, watch out for consumption trends and earnings from British American Tobacco.

Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 05 June 2023 

 

 

 

 

 

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