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Big Tech earnings come into focus

Stock markets in Asia started the week off higher as market participants shifted their attention away from last week’s losses due to “higher for longer” interest rate fears and towards corporate earnings. Gold and oil prices eased after both Israel and Iran signalled they’re not interested in escalating the conflict in the region.

Shane Strowmatt, LGT
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In the Asia-Pacific region, stock markets were mostly rebounding from last week’s losses. China kept its one-year loan prime rate (LPR) unchanged at 3.45% and the five-year LPR steady at 3.95%. The one-year LPR is the benchmark for most household and corporate loans, while the five-year LPR is the benchmark for most property mortgages. Hong Kong's Hang Seng Index was leading Asian gains on Monday, jumping more than 2%, while the Shanghai Composite was trading down 0.6%. In Tokyo, the Nikkei 225 gained 0.7% and in South Korea, the Kospi was trading about 1% higher. Australia’s S&P/ASX 200 was up 0.9%.

While the tension between Israel and Iran may have died down over the last days, putting pressure on gold and oil prices, the conflict in the region was still simmering. A US military base in Syria was believed to have been attacked by Iran-aligned Hezbollah fighters in Iraq at the weekend. Gold was trading around USD 2,370, while Brent crude oil fell to about 86.50 per barrel and West Texas Intermediate was being traded below USD 82 per barrel.

While equity markets spent most of last week under pressure due to the prospects of higher interest rates for longer, earnings at large cap companies – particularly the Big Tech stocks that drove the first-quarter stock market rally in the US – will be under scrutiny this week. Tesla (Tuesday), Microsoft (Thursday), Google (Thursday) and Intel (Thursday) report this week. Last week, tech companies missing Wall Street’s expectations were punished severely. ASML stock plummeted midweek after the Dutch semiconductor supplier failed to meet analysts’ expectations, particularly with regards to orders. On Friday, Netflix became the next tech stock to see losses for not meeting investors’ lofty expectations after reporting first-quarter results after the bell the day before. The stock fell more than 9% on Friday despite reporting earnings figures that beat Wall Street’s expectations as well as excellent subscriber growth. The worries about Big Tech’s high valuations spilled over to chipmaker Nvidia, whose shares plummeted 10% on Friday. The losses dragged down the tech-heavy Nasdaq-100 by more than 2% on Friday. The S&P 500 also lost 0.9%, while the Dow Jones Industrial finished Friday’s session with a 0.6% gain.

Looking ahead to macroeconomic releases this week, investors will get a better picture of where the world’s biggest economies are heading when a slew of Purchasing Managers’ Indices are released on Tuesday. The Bank of Japan will announce its most recent monetary policy decision on Friday and the US releases Personal Consumption Expenditure data on Friday, which will provide insight into the Federal Reserve’s next monetary policy announcement due on May 1st. Speeches by European Central Bank President Christine Lagarde and Swiss National Bank Chairman Thomas Jordan on Monday and Friday, respectively, will also be scrutinized for any signals about the timing of upcoming policy changes.

Rounding up last week’s macroeconomic data, producer prices in Germany fell by 2.9% in March when compared with the same month of the previous year. That’s less than the drop 4.1% in the Producer Price Index in February. Markets watch producer prices because companies often pass on price changes to consumers, thereby affecting the key inflation figures that central banks observe to determine their monetary policy. In Europe’s largest economy, Germany, consumer inflation fell to its lowest level since before the start of the war in Ukraine at 2.2% in March. The Euro Stoxx 50 lost 0.4% and Germany’s DAX was down 0.5% at the end of trading on Friday.

Retail sales in the UK remained unchanged in March after the amount of goods sold in the previous month was revised upward. Stalling retail sales suggests the recovery in the UK is weak and consumers lack the confidence to increase spending. Last week, Bank of England (BoE) Governor Andrew Bailey said UK inflation is moving in the right direction for a rate cut, but once the central bank begins cutting rates, it could take some time for the benefits to trickle down to private households.

Corporate news in focus: Quarterly figures from SAP, Verizon.

Economic data in focus: Bundesbank monthly report, euro-area Consumer Confidence Indicator.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
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