Ahead of additional earnings releases from corporate America, US stocks are supposed to open a little higher on Thursday, while the mood will continue to be alert since investors bolster for further market instability, intensified due to the testing of a new nuclear-capable intercontinental ballistic missile by Russia.
According to analysts, investors will further keep a close eye on remarks from Jerome Powell, Federal Reserve Chairman, who is slated to be seen at a discussion on the global economy held by the International Monetary Fund, with Christine Lagarde, European Central Bank President and the managing director of IMF, Kristalina Georgieva.
In Thursday’s pre-market trading, futures for the Dow Jones Industrial Average rose by 0.58%, whereas the broader S&P 500 index gained 0.73%. Contracts for the tech-heavy Nasdaq 100 gained 1.03%, recovering from losses caused due to Netflix’s drop on Wednesday.
On Wednesday, in after-hours trading, Tesla Inc’s shares (NASDAQ: TSLA) gained 5% following it took off issues related to supply chain and COVID-19 pandemic restrictions to report a seven-fold rise in net profit of US$3.3 billion in the Q1 and established a higher production target for the year.
On the contrary, shares of the world’s largest streaming company Netflix Inc (NASDAQ: NFLX) lost over 35% on Wednesday after its subscriber numbers slumped unexpectedly in the first quarter.
Analysts said since the reporting of upsetting results from big banks, investors became worried to see which companies managed to weather rampant inflation and in the case where American families can keep balancing their budgets against rising prices.
Ipek Ozkardeskaya, senior analyst at Swissquote said “Even though the sell-off of 35% (in Netflix shares) seems gigantic, we have already witnessed a 20%-30% fall or jump after the big tech results,” adding “The size of the reaction hints at how prices are (inflated) due to cheap liquidity and easy financial conditions of the pandemic months and the potential losses for other tech companies on the back of soft earnings announcements in the weeks to come.”
She said with the Federal Reserve supposed to act rather quickly to lessen inflation, the perspective for tech companies will continue to be unfavorable.
Ozkardeskaya stated though there hasn’t been any significant swapping of funds from tech to safe-haven stocks, companies that are not able to shift the cost of higher prices to customers are most probably to face more as compared to those that are able to do so.
At other places, prices of oil were slightly higher, showcasing concerns from the supply end since Russia’s oil production indicated a drop. Benchmark Brent crude futures gained 1.01% at US$107.88 a barrel, whereas WTI was up by 0.71% at US$102.92 a barrel.
Back in the United Kingdom, the positive beginning on Wall Street has provided a bit of a boost to the FTSE 100, which has now gained 5.38 points at 7634.6.
According to the latest government statistics, the UK housing market continues to be strong.
Since February, residential transactions in March rose by 18.2% to 110,990, though 36.2% lower than the same time earlier this year when the stamp duty holiday was due to end ahead of being stretched out.
The chief executive of The Guild of Property Professionals, Iain McKenzie, said “Home sales continue to inhabit a parallel world to all the economic indicators, with March transactions up almost a fifth on February,” adding “Home moves are down year on year, but only because of a rush to buy in March last year caused by the impending end of the popular stamp duty holiday.”
He continued “The industry continues to see a lack of properties on the market, which is pushing up prices across the board,” adding “Demand remains high, and the market looks likely to keep moving upwards as it continues to ignore all the uncertainty in the rest of the economy.”
The FTSE 100 continues to be in negative territory, only, since the vulnerability in the mining sector remains to hold on the market.
Currently, the leading index dropped 5.15 points at 7624.07 but it is off its lowest levels, having previously dropped as low as 7596.
Antofagasta PLC (LSE: ANTO) is off 7.03% following a distressing production update, and also its shares going ex-dividend.
Anglo American PLC (LSE: AAL) also stated the sector’s threat and dropped 6.83%.
The investment director at AJ Bell, Russ Mould, stated “It’s been a bad start to the year operationally for the big mining companies and their latest updates have served to act as a drag on the FTSE 100. Hot on the heels of Rio Tinto’s disappointing update was Anglo American flagging a tough first quarter and guiding for an increase in costs.”
He added “Commodity producers have enjoyed soaring prices in the past year but their moment in the sun might be coming to an end. The key question now is whether commodity prices are close to their peak for this cycle as a reduction in selling prices together with rising costs will put a squeeze on profit margins.”
“Shareholders in Anglo American can’t really grumble about its latest trading update as they’ve enjoyed a 24% share price gain over the past 12 months, more than double the FTSE 100’s 10.4% gain. But the news might make them think about banking some of the profits,” Mould said.
He continued “The cracks in the latest round of trading updates from the sector are a reminder that mining operations don’t always run smoothly, commodity prices rarely go up in a straight line on a sustained basis, and earnings are volatile,” adding “Antofagasta was also in the same boat as Anglo American, with a difficult first three months of 2022 and it delivered the news that spending will be at the top end of previous guidance.
These negative factors were compounded by its shares trading without the right to the next dividend.”
Eurozone inflation has become a little lower than anticipated in March, though it is still at a record high because of increasing energy prices.
According to Eurostat, earlier this month, the euro area yearly inflation rate was 7.4% which is up from 5.9% in February and right below the earlier prediction of 7.5%. Last year, the rate was 1.3%.
Analysts think the April statistic, due at the end of next week, could experience an additional rise to 8%.
For the whole of the European Union, annual inflation was 7.8% in March, which rose from 6.2% in February. Last year, the rate was 1.7%.
— EU_Eurostat (@EU_Eurostat) April 21, 2022
Leading shares have covered up a lot of their early losses and are currently just hardly in the red.
Now, the FTSE 100 has declined only 4.43 points at 7624.33 in spite of the persisting vulnerability in the mining sector. A positive performance from Rentokil Initial PLC (LSE: RTO) helped it.
The pest control and hygiene company rose by 2.69% following it reported that Q1 revenues had increased by 1.8% to £722mln, or 12.3% when besides the extreme contribution from coronavirus-related disinfection revenues in the earlier year.
It has also passed on higher costs to its customers.
It stated, “Total price increases achieved in the first quarter have entirely offset input cost inflation in the quarter, and we remain confident that we will be able to continue to counter rising inflation through annual price increases during the course of the year.”
The fund manager of the HL Select UK Growth Shares fund, Steve Clayton, which has a 3.1% position in Rentokil Initial, stated “This statement shows why Rentokil deserves a premium rating in the stock market.
So many other companies are struggling with the impact of inflationary pressures, but Rentokil’s customers value the services they provide so highly that the group can raise its own prices to cover its higher input costs, preserving its own margins in the process.”
Additionally, British Airways owner International Consolidated Airlines Group (LSE: IAG) is also moving higher up 5.01% following a positive update from US group United Airlines, which released record revenue guidance for the June quarter.
On Thursday, many companies saw their shares marked without the right to the latest dividend.
The ex-divs are aiding to impose more pressure on a market already attempting to deal with weakness in the mining sector.
They comprise Antofagasta PLC (LSE: ANTO), fallen 8.47% and also hit by an upsetting production report, Glencore PLC (LSE: GLEN), down 4.67%, Legal & General Group PLC (LSE: LGEN) off by 5.26% and BAE Systems PLC (LSE: BA.), falling by 2.54%.
Leading shares are in a clashing mood, resisting hopes of a good opening.
The FTSE 100 declined to 23.2 points or 0.31% at 7605.92 soon after the beginning of trading.
The head of markets at interactive investor, Richard Hunter said: “The index has fallen slightly behind as some further pressure on the miners combined with a number of stocks going ex-dividend, but still remains ahead by 3% in the year to date in a continuing display of outperformance relative to many of its global peers.”
Anglo American PLC (LSE: AAL) declined to 5.7% following it lessened its yearly production guidance following Q1 output declined by 10%.
In the meantime, Antofagasta PLC (LSE: ANTO) has declined to 7.2% since it stated copper production in the initial 3 months of the year fell by 24%, partially because of a persistent drought in Chile, however, it left the entire year guidance without any changes.
The miner’s shares have also gone ex-dividend.
BHP Ltd has also trimmed its copper production target for 2022 because of issues at its Escondida mine in Chile.
Markets are most probably to be alert prior to the Washington remarks from the central bank trinity of Federal Reserve Jerome Powell, ECB head Christine Lagarde, and Bank of England governor Andrew Bailey.
“Sterling traders will be looking for clues from Bank of England governor Andrew Bailey on the central bank’s intentions at its May meeting when some form of a rate hike is expected, although the extent of any move remains uncertain, whether it be 25bps or 50bps,” On Bailey, Michael Hewson of CMC Markets said.
He further added, “Traders would still be well advised to exercise some caution with respect to any comments Bailey might make given that in previous instances Bank of England guidance has been about as reliable as a chocolate teapot.”
Earlier this year, the Bank turned out to be indicating a rate increase in November though in the event, nothing occurred through December.
Pound Hardly Higher Than Dollar
Currently, the pound is hardly higher against the dollar, up 0.08% at US$1.3079.
The FTSE 100 was being called higher pre-open following a mixed day both on Wall Street and throughout Asia.
Financial spread betters were outlining in an increment of nearly 20 points for Footsie from Wednesday’s close of 7,629, rising to 28.
On Wednesday, the news was dominated by Netflix’s 35% share price decrease following its first loss of subscribers for ten years.
That hurt Nasdaq, which saw a decline of more than 1%, but Tesla’s update on Wednesday night was a lot more encouraging for tech fans.
Elon Musk’s electric vehicle maker reported record profits of US$3.3bn since deliveries increased by 68%.
The company said it is on track to send 1.3mln units in 2022, almost a rise of 60%.
Musk said that supply chains were a problem but higher prices were neutralizing this.
The senior market analyst in Oanda’s Asia Pacific office, Jeffrey Halley said “Tesla blew its Q1 results out of the water after the markets closed, sending its share price 5% higher,” adding “It also triggered another $23bn of awards into Elon Musk’s bank account apparently, so I guess he can tweet that “50% of funding is achieved” vis-à-vis his Twitter bid.”
Yesterday’s news bounces back towards macro matters with US Federal Reserve chair Jerome Powell, ECB President Christine Lagarde, and Bank of England governor Andrew Bailey all prepared to speak in Washington.
Inflation, interest rates, and geopolitics look sure to be on the agenda of all three.
UK company news is rather light, with online retail platform THG or the Hut most probably gathering the most attention following its nose dive around the last year
On Thursday, Asian shares were mixed since China’s CNOOC Ltd experienced its stock rise as high as 44% in its Shanghai debut in contempt of overall weakness in the Chinese market.
The Shanghai Composite fell by 1.68% whereas Hong Kong’s Hang Seng index declined by 1.8%.
Japan’s Nikkei 225 rose 1.23% and South Korea’s Kospi rose 0.51%.
Australia’s S&P/ASX200 closed 0.3% higher in a session headed by industrials and real estate stocks.
We will keep you updated with all the latest information until then stay tuned to our website.