The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation.
US equities finished mixed in a lacklustre trading session on Tuesday, as investors digested a batch of economic data and earnings while recession fears remain. The Dow Jones Industrial Average rose by 0.3% to 33,734, while the S&P 500 Index shed 0.1% to 4,017, and the Nasdaq Composite declined 0.3% to 11,334. European equities were mixed amid a host of PMI data across the globe, with the Euro Stoxx 50 ended flat at 4,153 following downward pressure from healthcare and oil and gas shares.
Summary as at 25.01.2023
- Asian equity markets were mixed this morning, as investors assessed data showing annual inflation in Australia surged to a 33-year high in Q4, while annual consumer prices in New Zealand came in below the central bank’s forecast. Shares in Japan and South Korea advanced, while Australian shares declined. Meanwhile, markets in China and Hong Kong remain closed for the Lunar New Year holidays.
- European shares are on track to tick lower in line with their US counterparts later in the day, as investors sift through corporate reports amid concerns over the global economy.
- Oil prices were steady on Wednesday after losing nearly 2% in the previous session, as demand recovery hopes in China vied with fears of a global economic slowdown. Also, an industry report showed yesterday that US crude inventories rose by 3.38 million barrels last week, much more than forecasts for a 1.6 million barrel increase.
- The preliminary S&P Global US Manufacturing PMI Index for January remained in contraction territory, but unexpectedly rose to 46.8 from December's unrevised 46.2 figure, and versus the consensus estimate of a slight decline to 46.0. The preliminary S&P Global U.S. Services PMI Index also gained ground but remained in contraction terrain, as the key U.S. sector in January increased to 46.6, compared to expectations of a modest gain to 45.0 from December's upwardly revised 44.7 figure.
- PMI data in Europe showed France’s manufacturing PMI, along with German and the Eurozone’s services activity, improved more than expected and moved into expansion territory in January. Conversely, France and the UK’s services PMI unexpectedly declined further into contraction territory, as did Germany’s manufacturing activity. Lastly, the Eurozone and the U.K.’s manufacturing PMI declined and remained contractionary.
- The US and Germany are poised to announce that they will provide their main battle tanks to Ukraine, offering Kyiv a powerful new weapon to counter Russia and overcoming a disagreement that threatened to fracture allied unity.
- ASML reported better-than-expected Q4 earnings this morning and forecast sales growth of more than 25% in 2023. The company which has struggled to meet demand as top customers TSMC, Samsung and Intel are all engaged in major expansions, said its order backlog had grown to a record €40 billion at the end of the year.
- Microsoft said revenue growth in its Azure cloud-computing business will decelerate in the current period and warned of a further slowdown in corporate software sales. The company reported better-than-expected results after the market close yesterday but weak revenue growth signalled tougher times for the sector.
- 3M Company yesterday posted adjusted Q4 EPS of $2.28, below the $2.36 estimate, as revenues declined 6% year on year (yoy) to $8.08 billion, relatively in line with the $8.05 billion expectation. MMM noted that its EPS was impacted by divestitures, foreign currency translation due to the strength of the USD, headwinds from the decline in disposable respirator demand, along with its exit out of Russia. The company estimated a 2-6% decline in adjusted total sales growth for FYE 2023. It also noted that it will reduce approximately 2,500 global manufacturing roles based on what it saw in its end markets.
- Verizon Communications reported adjusted Q4 EPS of $1.19, in line with estimates, as revenues rose 3.5% yoy to $35.25 billion, above the estimated $35.09 billion. The telecommunications conglomerate closed 2022 with Q4 results that were marked by wireless service revenue growth and the highest total wireless retail postpaid net additions in seven years. The company provided a full-year EPS guidance range that was lower than anticipated.
- Johnson & Johnson announced adjusted Q4 EPS of $2.35, versus the $2.23 forecast. Revenues declined 4.4% yoy to $23.70 billion, compared to the $23.90 billion estimate, as a result of unfavourable foreign exchange translations and reduced COVID-19 vaccine sales versus the prior year. The company noted a 1.3% yoy sales growth to $94.90 billion, which was primarily driven by strong commercial execution but also partially offset by foreign exchange.
- Lockheed Martin Corporation reported adjusted Q4 EPS of $7.79, above the estimated $7.41, as revenues increased 7.1% yoy to $18.99 billion, higher than the $18.28 billion prediction. The company issued full-year EPS guidance that came in below forecasts, and offered a revenue range that was in line with expectations.
