JASPER’S MARKET SQUAWK 26-10-2022

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JASPER'S MARKET SQUAWK 26-10-2022

US stocks reach 6-week high

Weaker House and Manufacturing data were offset by better-than-expected corporate reports, supporting stocks, and keeping yields down. Nasdaq was the biggest beneficiary of the latest gains as expectations that Big Tech earnings will fare well improve while Fed speculation turns more dovish.

GBP/USD chart

Key factors for today:

• Stocks climb higher on better-than-expected earnings, Fed speculation


• Cable to $1.15 as Sunak inspires confidence after an immediate speech as PM


• Amazon and Microsoft disappoint, but investors bet on the rest of tech earnings

Nasdaq soars 2.25% after upbeat earnings

Although Alphabet and Microsoft have a large market cap share, key indices closed higher on Tuesday. S&P500 and DJIA registered gains of 1.63% and 1.07%, but Nasdaq surged a staggering 2.25% as 10-year Yields got dumped by investors turning more comfortable with the idea of a less hawkish Fed. Meanwhile, the Senate Banking Chair wrote a letter to Fed Chair, warning not to raise rates due to concerns around employment.

On the data front, US House Prices recorded a 12-year low on high mortgage rates, with US Consumer Confidence confirming the trend amidst heightened inflation. The CB index plunged to 102.5, close to 30-year lows.

Cable 1.80% higher on Sunak’s first day

UK’s new PM, Rishi Sunak, confirmed that Jeremy Hunt would remain as Chancellor hours after taking the leadership reins. The reshuffling is expected to continue into the day. GBP/USD climbed to $1.15 after having an exemplary session 1.80% higher. But rumours grew that the fiscal statement expected on Oct 31 might be delayed, with the last few days of October critical to how cable might fare. Meanwhile, the first data to be reported under the new premiership showed that CBI Industrial Trends Orders contracted less than anticipated.

Big Tech boys slump 7% lower

Alphabet and Microsoft reported earnings, with the search engine having the slowest growth rate in 9 years and below expectations. The company said YouTube ad revenue fell 2% on a 3% expectation and warned of a headcount growth decrease. As a result, GOOG shares lost 7%. The tech sector had further jitters when Microsoft said it expected weakness in the cloud sector, one of the main supports for revenue across the space. MSFT last traded 7% lower, averaging 26% in 2022 and lower than the S&P 500 at 19%. Meta, Amazon, and Apple are also expected to report later this week.

Solar in focus

The US is ramping up controls on China’s semiconductor industry, which could further impact supply. LONGi Green Energy stopped quoting the price of mono-Si wafers used to manufacture solar panels, implying an increase in prices is coming.

Movers and shakers

• Twitter moves 2.8% higher after reports suggested that Musk was looking to close the deal by Friday, ahead of the US midterm elections


• 3M initially dropped 5% but recovered the day after reporting earnings, guiding the fourth quarter well below consensus and warning that consumer spending was softening


• MSCI rose 8.8% following earnings that beat the bottom line. Despite cutting EBITDA guidance, the company raised its FCF outlook


• Brown & Brown plunged 12.7% after reporting earnings that failed to meet analysts’ expectations and also reported lower operational margins


• Centene jumped 10.3% after beating the top and bottom lines and raising its outlook

On the docket

• Meta, Boeing, Iberdrola, Santander, Hilton, Ford, Barclays, Deutsche, Canon, UniCredit and Daimler are expected to report earnings


• BOC interest rate decision, with economists looking for a 75bps hike


• New US Home Sales to confirm the downward trend

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