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 lower in choppy action amid a full slate of economic reports, including the Import Price Index, which fell at a slower pace than expected, and retail sales which rose at a faster rate than anticipated. Earnings reports offered varied results, as Target missed earnings expectations and delivered disappointing guidance, while Lowe’s posted a positive earnings surprise and raised its full-year outlook. The Dow Jones Industrial Average shed 0.1%, the S&P 500 Index was down 0.8%, and the Nasdaq Composite decreased 1.5%. European markets were lower following a host of inflation data in the region and as geopolitical tensions surrounding the war in Ukraine continued to put a damper on sentiment.
- Asian equity markets mostly fell on Thursday, tracking a global retreat in the previous session. The People’s Bank of China warned that inflation in China may accelerate due to an expected pick-up in demand, giving it less room for further monetary easing. Shares in Japan, South Korea, mainland China and Hong Kong declined. Australian shares gained despite weaker commodity prices.
- European and US equity futures were both marginally higher this morning as investors digested a fresh batch of earnings reports.
- Oil prices fell for a second day in early Asian trade this morning as concerns over geopolitical tensions eased and the rising number of Covid-19 cases in China added to demand worries in the world’s largest crude importer.
- Retail sales in the US surged 1.3% month-over-month (m/m) in October, the strongest increase in eight months, after a flat reading in September and beating market forecasts of a 1% gain. Data for October pointed to resilient consumer spending, despite high inflation and rising borrowing costs.
- The annual inflation rate in the UK jumped to 11.1% in October from 10.1% in September, much higher than market forecasts of 10.7%. It is the highest inflation rate since October 1981, with the main upward pressure coming from gas and electricity. Without government intervention to limit the price of household energy bills, inflation would have risen to around 13.8%. Compared to September, the CPI jumped 2%, above forecasts of 1.7%.
- Cisco Systems’ fiscal first-quarter results surpassed Wall Street’s estimates as product sales grew, while the tech giant late Wednesday raised its full-year financial outlook. Adjusted EPS rose to $0.86 during the three months ended 29th October from $0.82 a year earlier, compared with the consensus for $0.84. Revenue gained 6% to $13.63 billion, higher than the Street’s $13.29 billion view.
- Nvidia beat expectations for Q3 revenue late on Wednesday, thanks to strong demand in its data center business on the back of rising cloud adoption. The company’s adjusted revenue for the quarter that ended 30th October was $5.93 billion. Analysts on average had expected revenue of $5.77 billion. Nvidia forecasted current-quarter revenue of $6 billion, plus or minus 2%, versus the expectation of $6.09 billion.
- Siemens said Thursday that Q4 earnings rose as revenue increased in all industrial businesses, led by double-digit growth at its digital industries and smart-infrastructure divisions. The company said it had orders for the fourth quarter valued at €21.82 billion, up from the €19.07 billion for the prior-year period. It also proposed to increase its dividend to €4.25 from €4.00 per share.
- Lowe’s Companies reported adjusted Q3 EPS of $3.27, above estimates of $3.09, as net sales were up 2.4% year-over-year (y/y) to $23.48 billion, versus the expected $23.12 billion. The home improvement retail company highlighted how it was able to make a substantial improvement in adjusted operating margin through disciplined execution and cost management. As a consequence, it also raised its full-year guidance.
- Target Corporation reported adjusted Q3 EPS of $1.54, noticeably below the $2.16 expected by analysts, as total revenues were up 3.3% y/y to $26.52 billion, above the anticipated $26.40 billion. Based on softening sales and profit trends, the company gave Q4 guidance of low-single-digit comparable sales declines and an operating margin outlook that came in below expectat