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(Alliance News) - Another poor set of quarterly figures from a big US tech stock, this time Facebook-owner Meta Platforms, means European markets were set to open lower on Thursday, while traders await the latest interest rate decision by the European Central Bank.
It was a mixed close for stocks in the US on Wednesday, with the tech-heavy Nasdaq taking a hit from disappointing tech earnings, even before the Meta results were issued after the close. Late Tuesday, earnings from Microsoft and Google-owner Alphabet also had left investors uncomfortable.
AvaTrade's Naeem Aslam said traders are "questioning the message" coming from the tech megacaps in the US.
"Meta was disappointed in its earnings last night, and the stock tumbled last night, and the game is still not over yet, as Amazon and Apple will still have to report their numbers this week," he said.
Meta lost 20% in after-hours trade in New York after the release of its earnings. The stock already had lost 5.6% in the regular session on Wednesday, amid share tumbles for Alphabet and Microsoft, closing down 9.1% and 7.7%, respectively.
Meta Platforms, reported, for the three months that ended September 30, that its revenue fell 4% to USD27.71 billion from USD29.01 billion a year before. Income from operations dropped 46% to USD5.66 billion versus USD10.42 billion. Net income was USD4.40 billion, down 52% versus USD9.19 billion.
Focus now shifts to the ECB. Stock market sentiment was raised by a smaller-than-expected rate hike by the Bank of Canada, which lifted rates by just 50 basis points - giving hope that central banks are ready to ease back on monetary policy tightening.
"European markets got a late pick-me-up yesterday, closing at five-week highs, after the Bank of Canada surprised the market by hiking rates by a less than expected 50bps, with Bank of Canada Governor Tiff Macklem going on to admit that the central bank was placing a lot more emphasis on the effects of the slowdown when crafting rate strategy going forward. This could have implications if the Federal Reserve were to start thinking the same way next week, hence the selloff in the US dollar," CMC Markets analyst Michael Hewson said.
The European Central Bank announces its interest decision at 1315 BST on Thursday, before the Federal Reserve next week Wednesday and the Bank of England a day after its US counterpart.
ECB policy-makers continue to deal with sky-high inflation and surging energy costs, which will likely see the central bank carry out its third successive interest-rate hike - this one likely to be 75 basis points or more.
Analysts are all but convinced the bank will up rates by another 75 basis points, but some say there is room for a full percentage point raise - 100 basis points.
Carsten Brzeski, global head of macro at ING, said the hawks are running the roost at the ECB, "clearly convincing the few doves left of the necessity to go big on rate hikes again".
In Asia, stock markets were mixed.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 21.37 points, or 0.3%, at 7,034.70
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Hang Seng: up 1.0% at 15,463.83
Nikkei 225: closed down 0.3% at 27,345.24
S&P/ASX 200: closed up 0.5% at 6,845.10
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DJIA: closed marginally higher, up 2.37 points at 31,839.11
S&P 500: closed down 28.51 points, or 0.7%, at 3,830.60
Nasdaq Composite: closed down 228.12 points, or 2.0%, at 10,970.99
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EUR: soft at USD1.0059 (USD1.0064)
GBP: down at USD1.1602 (USD1.1612)
USD: down at JPY145.71 (JPY146.50)
GOLD: down at USD1,663.40 per ounce (USD1,665.70)
OIL (Brent): soft at USD93.48 a barrel (USD93.93)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
14:15 CEST EU ECB interest rate decision
08:00 CEST Germany GFK consumer climate survey
09:30 BST UK Cabinet Office Minister Nadhim Zahawi takes questions
08:30 EDT US unemployment
08:30 EDT US export sales
08:30 EDT US gross domestic product
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Rishi Sunak has demoted allies of Liz Truss and rewarded his own supporters as he ploughed on with a ministerial shake-up drawing on all factions of the embattled Tory party. The prime minister was already fielding criticism over reinstating Suella Braverman as Home Secretary as he tore up his predecessor's growth plan and delayed the highly-anticipated autumn budget in a packed first full day in the top job. The reshuffle continued with the announcement of several junior appointments on Wednesday evening, with Truss allies and former Cabinet attendees Anne-Marie Trevelyan and Chris Philp accepting new, less prominent government roles. There were also jobs for Sunak loyalists Alex Chalk, Lucy Frazer and Helen Whately, while former long-serving schools minister Nick Gibb returned to the Department for Education, joined by senior Tory and vocal Truss critic Robert Halfon.
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The International Energy Agency said it believes global emissions will peak in 2025 as surging energy prices due the Russian invasion of Ukraine propel investment in renewables. Only last year the IEA said there was "no clear peak in sight" in energy emissions, but the new higher investment in wind and solar is setting up demand for all fossil fuels to peak or plateau, leading to a drop in emissions. "The global energy crisis triggered by Russia's invasion of Ukraine is causing profound and long-lasting changes that have the potential to hasten the transition to a more sustainable and secure energy system," the IEA said as it released its latest annual World Energy Outlook report. Based on the latest measures and policies announced by governments in the face of soaring energy prices, the IEA forecasts global clean energy investment to rise by more than 50% from today's levels to USD2 trillion per year by 2030.
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BROKER RATING CHANGES
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Barclays cuts Standard Chartered price target to 750 pence (800p) - equal-weight
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Barclays cuts Reckitt Benckiser price target to 8,200 pence (8,900p) - overweight
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Barclays cuts WPP price target to 850 pence (900p) - equal-weight
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COMPANIES - FTSE 100
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Oil major Shell announced net profit totalling USD6.7 billion in the third quarter, after oil prices surged, improving from a loss after tax of USD447 million in the same period last year. Chief Executive Ben van Beurden said: "We are delivering robust results at a time of ongoing volatility in global energy markets. We continue to strengthen Shell's portfolio through disciplined investment and transform the company for a low-carbon future. At the same time we are working closely with governments and customers to address their short and long-term energy needs."
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Lloyds Banking said its third quarter was "robust", thanking its income growth, balance sheet "momentum" and "resilient" customer focus. In three months to September 30, pretax profit slumped 26% to GBP1.51 billion from GBP2.03 billion. The bank set aside GBP668 million in the quarter as underlying credit impairments to handle the fallout from increased bad loans, reversing from the GBP119 million gain recorded the year prior. Net income was up 13% to GBP4.59 billion from GBP4.08 billion, as underlying net interest income rose 19% to GBP3.39 billion from GBP2.85 billion, but other income was down 4% to GBP1.28 billion from GBP1.34 billion. Aiding its income growth, Lloyds's banking net interest margin improved to 2.98% from 2.55%. Looking at 2022 as a whole, the bank said its NIM will top 2.90%.
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Consumer goods firm Unilever reported strong growth in the third quarter, with all of its units seeing double-digit growth, except for Nutrition. In the three months to September 30, turnover rose 18% to EUR15.8 billion, with underlying sales growth at 11%. "Price growth has sequentially improved in each of the past seven quarters, reaching 13% in the third quarter. While pricing had, as expected, some negative impact on volume, underlying volume growth improved in four Business Groups compared to the second quarter," Unilever explained. Looking ahead, it now expects underlying sales growth for 2022 to be above 8%.
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Anglo American's copper and platinum metals production fell by 6% in the third quarter, with iron production down 5% as the diversified miner lamented a "challenging operating environment". Copper production was down to 147,000 tonnes, while Platinum slipped to 1.05 million ounces. Iron was down to 16.1 million tonnes. Steelmaking coal, however, was up 28% to 5.5 million tonnes. Anglo added: "As we move through the final quarter, we are focused on maintaining this operational momentum to deliver our full year guidance. The continued safe ramp-up of our steelmaking coal operations, as well as further performance improvements at our iron ore businesses, are priorities to set the platform for delivery into next year."
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COMPANIES - FTSE 250
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Renishaw's profit slipped in the three months to September, its financial first quarter, but noted its overall performance was in line with board expectations. Pretax profit fell 2% to GBP38.6 million from GBP39.3 million a year earlier, while total revenue jumped 14% to GBP179.9 million from GBP157.8 million. Renishaw said it is "managing costs carefully" as it sees a dip in demand. It added: "We have made a positive start to the current year and our order book remains strong. We have, as recently reported, seen a weakening in order intake from the semiconductor and electronics sectors, and general market sentiment is becoming more cautious."
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Inchcape said it "delivered another strong performance" in the third quarter as total revenue was up nearly a quarter. Revenue rose 24% to GBP2.1 billion. "In light of the strong performance to date and our expectation for the fourth quarter, we now expect to deliver FY22 adjusted pretax profit from continuing operations towards the top end, or slightly above, the previously guided range - of GBP350 million to GBP370 million - at prevailing FX rates," it added. Notes it expects to close its Derco takeover deal at the end of 2022 or in the first quarter of 2023.
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OTHER COMPANIES
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Irish food and nutrition firm Kerry Group saw "excellent" growth in the third quarter, with volumes up 6.6% and pricing up 11%. As a result, Kerry said revenue rose 16% in the quarter. Chief Executive Edmond Scanlon said: "Our volume growth was broad based across our regions, channels and markets, led by excellent performances in Snacks, Beverage, Meat and Bakery in particular. We also made good strategic progress with further footprint expansion and strategic acquisitions." Kerry upped its annual earnings outlook, now expecting to achieve adjusted earnings per share growth in 2022 of 6% to 8% on a constant currency basis.
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By Paul McGowan; paulmcgowan@alliancenews.com
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