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Alphabet and Microsoft defy economic worries

The economic slowdown and rising inflation in the world's largest economy, the USA, dampened stock markets in several regions yesterday. Following Wednesday's Meta earnings report, which had caused unease ahead of further publications by major technology stocks, Alphabet and Microsoft presented strong results on Thursday and caused share prices to rise in after-hours trading. As expected, the Bank of Japan (BoJ) left its key interest rate unchanged.

Dominique Stutz, LGT
Temps de lecture
5 minutes
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First-quarter gross domestic product in the USA rose by 1.6% year-on-year, missing the estimate of 2.4%. The price index for personal consumption expenditures (PCE) - an important inflation variable for the US Federal Reserve - recorded an annualised increase of 3.4% for the Q1 period, the strongest rise in a year. Even excluding food and energy, the 3.7% rise in core PCE prices was well above the Federal Reserve's (Fed) 2% target and also exceeded expectations. PCE with March data will be published on Friday. Consumer spending rose by 2.5%, below the estimate of 3%. Overall, therefore, growth was slower than expected and inflation higher than anticipated. This is likely to call into question the Fed's ability to cut interest rates in the foreseeable future. The lacklustre GDP and signs of persistent inflation left their mark on the New York stock markets on Thursday. The Dow Jones Industrial lost just under 1% to close at 38,085.80 points, while the broad-based S&P 500 fell by 0.5% to finish at 5048.42 points. The Nasdaq 100 recovered some of its losses and fell by 0.6% to 17,430.50 points.

After Meta's report on Wednesday did not bode well for the figures from Microsoft and Alphabet, the two tech giants lost up to 2.5% ahead of their reports. However, the results published after the close of trading on Thursday allayed fears for the time being. Alphabet recorded sales growth of 15%. Like Meta, Alphabet is investing in artificial intelligence - but the investments are turning into sales. The Alphabet report resulted in a 12% rise in the share price in after-hours trading. Tech giant Microsoft also exceeded expectations with its figures and saw its shares rise by 4.5% in after-hours trading.

In the Asia-Pacific region, the BoJ left its key interest rate unchanged at 0%-0.1%. The decision resulted in a further weakening of the yen, which reached a new 34-year low. After the BoJ had abandoned its years-long negative interest rate policy earlier than expected in March and thus made the first rate hike in 17 years, this decision came as no surprise to traders. The Nikkei 225 in Tokyo rose by 1% and in South Korea the Kospi traded around 1.1% higher. The Hang Seng Index in Hong Kong led the gains in Asia on Thursday with a rise of 2.6%, while the Shanghai Composite traded 1.1% higher. The Australian S&P/ASX 200 fell by 1.3%.

In Europe, the improved GfK consumer climate in Germany joined the series of economic data that have been positive surprises in recent days. After the negative reaction on the New York stock exchanges also rubbed off on the European stock markets, the EuroStoxx 50 lost 1% at the close and finished at 4939.01 points.

Corporate news in focus: quarterly figures from AbbVie, ams, Exxon Mobil, Porsche, TotalEnergies, Toyota

Economic data in focus: UK Gfk consumer confidence, Tokyo consumer price index, Tokyo CPI ex. Food and energy, BoJ interest rate decision, SNB President Thomas Jordan speaks, USA Personal Consumption Expenditures, USA Michigan Consumer Sentiment Index

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Editor: Alessandro Fezzi
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