How are investors buying September’s dip?

Equities
Investments

In recent weeks, stock markets around the world dropped to new monthly lows. As ever, eagle-eyed investors were keen to buy the dip. Here are some stocks they were keen to snap up.

The September stock market dip: what caught investors’ eye

Market turmoil has been rocking the bourses in the wake of the Evergrande wobble and a general risky asset sell-off.

Although things have since stabilised, with the S&P 500, Nasdaq, and Dow Jones all up 1% this morning and the FTSE making gains, investors were still keen to take advantage of the dip.

In particular, many stocks on the S&P 500 have been subject of retail investor attention. The index experienced its largest drop since May at the start of the week.

A new report from Vanda Research suggests a $3bn spending spree occurred on Monday and Tuesday as stock buyers looked for some perceived bargains.

According to Vanda Senior Strategist Ben Onatibia, retail investor activity contradicts earlier statements that their appetite for stocks may have been waning. With indices down, this gave them a great opportunity to add to their portfolios.

The stocks investors were buying

Vanda Research shows the below individual stocks were retail customers’ favourites during the recent market downturn.

Stock Ticker Retail purchase volume (last 5 days from September 22nd)
Apple AAPL $362,100,000
Advanced Micro Devices AMD $154,5300,000
AMC Entertainment AMC $90,570,000
Microsoft MSFT $89,700,000
Alibaba BABA $83,420,000
Verizon Communications VZ $79,660,000
Wynn Resorts WYNN $73,700,000
Las Vegas Sands LVS $55,350,000
Nvidia NVDA $54,490,000
Intel INTC $53,900,000

 

Let’s start with Apple. The California tech giant is coming hot off announcing a fresh wave of iPad, iPhone and Apple Watch models at last week’s California Streaming event. The company continues to dominate in the smartphone field. As of June, sales of the latest iPhone 12 had already exceeded 100 million units, and Apple’s laptops and tablets continue to post similarly strong sales numbers.

No new AirPod headphones were released, despite markets thinking Apple would launch its next-gen EarPods at its most recent big conference. However, with such strong sales from the iPhone, it probably doesn’t need to launch them just yet. Consumer confidence in the brand is already exceptionally high.

We can see from the list a heavy leaning towards tech stocks. Excluding Apple, investors spent a combined $378.38m on companies within the tech sphere, including Microsoft, Verizon, and chip manufacturers AMD and Nvidia.

Computer chipsets are hot property globally right now. A general shortage means prices are up. Chipsets are used in practically all the modern conveniences of modern life. Everything from the aforementioned iPhone to cars and graphics cards needs these tiny pieces of electrical microengineering to work – hence their sky-high demand, and why investors are eyeing up companies like AMD.

Graphics cards in particular are coveted by cryptocurrency miners. Each powerful mining rig requires stuffing computers to the brim with components to solve the complex equations that result in fresh digital tokens like Bitcoin.

Speaking of Bitcoin, AMC Entertainment, the memestock and cinema chain, recently gave itself a boost. CEO Adam Aron has announced the company will soon start accepting Bitcoin and other cryptos as payment.

Aron also mentioned AMC is flirting with the idea of entering the burgeoning non-fungible token (NFT) market – possibly through offering commemorative digital cinema tickets.

AMC was already a popular stock for the younger breed of traders trying to shake up the traditional system. Its embracing of digital currencies may make it a more attractive prospect amongst new, Millennial investors.

But let’s not get too carried away with the tech-related stocks. Retail buyers also snapped up over $100m in travel-related stocks too. As you can see from the table above, the big winners here were Las Vegas Sands and Wynn Resorts.

The holiday firms will no doubt be bracing for a renewed wave in vacations as we approach the US holiday season. Thanksgiving and Christmas are just around the corner. Also, the US has given the green light to inbound travel for vaccinated EU and UK travellers, which could point towards an uptick in bookings for both firms.

As mentioned above, stocks have started to recover with major European and US bourses making ground in trading today. But retail investor activity goes to show that vigilance is required to spot opportunities in periods of volatility.

10 stocks that make Goldman’s conviction list

Equities
Investments

Goldman Sachs’ list of conviction stocks has just been updated. Here are some choice selections for you to keep an eye on.

Goldman Sachs conviction stocks

The conviction list is Goldman’s selection of equities it believes will overperform this year. All of the stocks that make the grade hold a buy rating.

As ever with these things, the companies Goldman highlights come from a mixture of different sectors. A slew of new equities have been added to the list for 2021, from tech, energy and beyond.

Let’s take a look at some standout picks.

Energy stocks

Houston, Texas-based NRG Energy made the list in June and currently holds a $53 target price. The bank cites elevated cash flows in 2022 and a compelling valuation as reasons why the gas & electricity supplier is a conviction stock. NRG stock could jump 25% in the coming months, according to Goldman.

Elsewhere, Targa Resources, another North American energy supplier, cemented its place on Goldman’s conviction list in March. In an investment note, the bank dubbed Targa “one of the most compelling companies in our midstream energy coverage.”

Targa’s “significant” buyback programme and double dividend attracted Goldman’s eye, suggesting the energy supplier’s profits and cash flows are on the up.

Another midstream firm, Michigan’s DTE Energy, also makes the list, with Goldman Sachs liking the oil transporter/processor’s decarbonisation efforts.

FMCG & consumer-focussed stocks

Switching to a more consumer-bent, a number of companies are fresh additions to the conviction list.

Let’s start with Chipotle. The Mexican fast-food joint has been called a “clear digital leader” by the bank. An easy-to-use app, strong online presence, new menu items, and a solid loyalty programme all underpin Chipotle’s fundamentals. Development of new drive-thru “Chipotlanes” also help the stock’s favourable rating.

Sportswear retailer Lululemon gained conviction status in July. Post-pandemic growth opportunities help the stock on its way, as well as the nature of its direct-to-customer online business which cuts out the middleman.

Constellation Brands, which owns Corona and Modelo beers, was a February conviction addition. When added to the list, Goldman praised Constellation’s strong fundamentals.

“We believe Constellation Brands remains one of the best growth stories across the U.S. Staples universe and is advantageously levered to the most attractive opportunities in alcoholic beverages – premium import beer, hard seltzers, and premium wines and spirits,” the bank stated in an investment note.

Technology stocks

Goldman joins Jeffries in signalling a number of different tech equities that could perform well for investors.

“Microsoft stands out very uniquely in the technology world given its strong presence across all layers of the cloud stack including applications platforms and infrastructure,” a Goldman investment note said.

With the bank believing the Seattle computing giant will post a strong fourth quarter, Microsoft makes its conviction list.

Salesforce also makes it. Goldman was attracted to Salesforce’s commitments to aiding worldwide digital transformation – something which greatly picked up during the pandemic – naming the brand as one of the standouts in the $1 trillion global cloud technical account management market.

Financial equities

Finally, let’s look at two financial stocks Goldman likes.

The first is investment firm Evercore Partners. Goldman believes Evercore is about to benefit greatly from upcoming M&A activity and continued profits from fees generated through advising special-purpose acquisition vehicles (SPACs).

“We see potential upside surprise vs. consensus on capital distributions, due to the stronger earnings we forecast, coupled with a robust cash position,” Goldman said.

Fifth Third Bank could also benefit from rising interest rates once the Fed ups its current historically-low cash rate.

“We believe it will see top quartile performance when rates rise and it leverages the benefits of medium term cost cuts,” said Goldman.

Week Ahead: Fed meets, US GDP & Big Tech earnings

Week Ahead

In the week ahead, the Federal Reserve holds its first meeting of the new year, with a range of new appointments in place, but a major policy change seems unlikely. Latest US GDP figures are released too. Forecasts are showing a mixed but optimistic outlook for Q4 2020’s numbers. Finally, earnings season continues with big tech firms leading the large caps in the latest earnings calls. 

FOMC meeting & press conference 

The first Federal Reserve meeting of 2021 goes ahead next week, off the back of newly inaugurated Joe Biden’s plans for additional stimulus and Treasury pick Janet Yellen’s calls to ‘act big’ on fiscal policy. $1.9 trillion is the ballpark figure for additional economic stimulus as the US seeks to shore up its economy against the continued Covid-19 onslaught. 

Four new regional Fed presidents are being rotated into the key voting spots this January – a rotation that could indicate a more dovish Fed for 2021. Out go Mester (hawk), Kashkari (dove), Kaplan (neutral) and Harker (neutral). In come Evans (dovish), Daly (neutral), Bostic (dove), and Barkin (neutral).  

New members provide a little interest, but the Fed is not about to change course, with Jay Powell making it clear that now is not the time to talk about tapering bond purchases, although some policymakers have suggested this may be warranted later in 2021. 

According to December 2020’s Fed meeting minutes, policymakers see rates staying in the 0%-0.25% currently targeted range until 2022, with a long-range estimate of 2.5%. No one foresees a rate hike this year. The status quo is very much in favour. According to Atlanta Fed President Bostic, a lot would have to happen for that to occur. 

There is a possibility of some increases in 2023, and maybe even as early as the second half of 2022. Three key points will be looked at: the health of small businesses, the effect of Fed lending programmes, many of which were closed by the end of 2020, and temporary vs permanent job losses. Overriding all of those though will be the continued response to the Covid-19 pandemic.  

Right now, it appears that the Fed will essentially be staying the course, committing to policy established across the course of 2020. 

Latest US GDP figures released

Like pretty much every advanced economy worldwide, the US was rocked by repeated blows from the Covid-19 pandemic. Thursday sees the advanced reading of Q4 GDP stats and the picture looks muddled to say the least. GDP diagnoses really depend on who you ask. 

The Atlanta Fed’s GDPNow model forecasts 7.4% annualised growth in Q4 as of its January 15th release, although this has been revised down from 8.7% forecast on January 8th., The New York Fed’s Nowcast model indicates 2.5% expansion.  

GDP growth will all depend on which economic sectors can back on their feet fastest. The US Commerce Department stated recently that consumer spending, the US main economic engine, had been revised upward slightly, alongside fixed business investments. However, these were tempered by a drop in exports. Services, where 61% of consumer spending goes, were down 17% year-on-year in third quarter of 2020 – can they recover? Time will tell.  

Earnings Season – Apple, Microsoft and Facebook lead the large caps 

Earnings season continues on Wall Street and this week the focus shifts to tech giants. Big tech seems like it’s getting bigger and bigger with lockdowns playing into the sector’s hands. Will earnings reports confirm that? 

Apple could be onto its first-ever $100bn quarter as the consensus EPS climbs 12% year-on-year to $1.40. Holiday shopping season falls squarely into Apple’s first-quarter reporting, and with a multitude of iPhone 12 models hitting markets – enough for 30% rise in production numbers this quarter – the indicators a bumper earnings call coming from the California tech giants are pretty strong. 

Microsoft has been a winner. If you’re working from home, you’ve probably had to grapple with Microsoft Teams, now the de facto business communications software of choice for businesses around the globe.  

Cloud computing solutions are helping Microsoft push record quarterly revenues. With the increased uptake of products like Azure, GitHub, SQL Server, and Windows Server, commercial cloud services have generated 31% more revenue y-o-y in the recent quarter, hitting $15.2bn. Combined with its other productivity-led software, i.e. Office, Teams, etc., Microsoft Q1 2021 revenues are on course to reach $40.2bn.  

Facebook’s reputation has taken a bit of a hit in recent months. The spread of fake news and hate speech on the platform is one of the major complaints levelled at the company. 

Despite this, Facebook reported 12% growth in active daily users in the last quarter, up to 1.82bn, while monthly active users grew at the same rate, reaching 2.74bn – just over a quarter of the global population. Ad revenues are up 22% yoy too, even in the face of a boycott from 1,000 prominent advertisers. 

See below for a full breakdown of the large caps reporting earnings this week. 

Major Economic Data 

Date  Time (GMT)  Currency  Event 
Mon Jan 25       
       
Tue Jan 26  7.00am  GBP  Unemployment Claims 
       
  3.00pm  USD  CB Consumer Confidence 
       
Wed Jan 27  12.30am  AUD  CPI q/q 
       
  3.30pm  USD  US Crude Oil Inventories 
       
  7.00pm  USD  FOMC Statement 
       
  7.00pm  USD  Federal Funds Rate 
       
  7.30pm  USD  FOMC Press Conference 
       
Thu Jan 28  1.30pm  USD  Advanced GDP q/q 
       
  1.30pm  USD  Advanced GDP Price Index q/q 
       
  3.00pm  USD  CB Leading Index m/m 
       
  3.30pm  USD  US Natural Gas Inventories 
       
Fri Jan 29  8.00pm  CHF  KOF Economic Barometer 
       
  1.30pm  CAD  GDP m/m 
       
  2.45pm  USD  Chicago PMI 
       
  3.00pm  USD  Pending Home Sales m/m 

 

Key Earnings Data 

Date  Company 
Mon 25 Jan  NIDEC  
  Philips 
  Kimberely-Clark 
  ADM 
  Graco Inc. 
  Brown & Brown 
  Equity Lifestyle Properties 
   
Tue 26 Jan  Microsoft 
  Visa 
  Johnson & Johnson 
  LVMH 
  Verizon 
  Novartis 
  NextEra Energy 
  Texas Instruments 
  Starbucks 
  AMD 
  United Technologies 
  American Express 
  General Electric 
  3M 
  Lockheed Martin 
  Canadian National Railway Co. 
  UBS 
  Capital One 
  Prologis 
  Rockwell Automation 
  PACCAR 
  D.R. Horton 
  Maxim Integrated Products 
  Epiroc 
  LG Household & Health Care 
  EQT AB 
  SGS SA 
  Varian 
  Boston Properties 
  Jacobs 
  Nitto Denko Corp. 
  Metro Inc. 
  C.H. Robinson 
  Disco Corp. 
  F5 Networks 
  W.R. Berkley 
  OBIC 
   
Wed 27 Jan  Apple 
  Tesla 
  Facebook 
  AT&T 
  Abbott Laboratories 
  Boeing 
  ServiceNow 
  Stryker 
  Lam Research 
  Anthem 
  Shin-Etsu Chemical Co. 
  Blackstone 
  Automatic Data Processing Inc. 
  Crown Castle 
  Norfolk Southern Corp. 
  Edward Lifesciences Corp. 
  FANUC CORPORATION 
  MediaTek 
  Lonza AG 
  CPR 
  General Dynamics 
  TE Connectivity Ltd 
  Las Vegas Sands Corp. 
  Amphenol Corp. 
  ITC Ltd. 
  Xilinx Inc. 
  V.F Corp 
  Corning Inc. 
  Axis Bank 
  Ameriprise Financial Inc. 
  Hormel Foods Corp. 
  Teradyne 
  Nasdaq Inc. 
  Nomura Research Institute 
  Essity AB 
  Cheil Industries 
  MarketAxess Holdings 
  Hologic 
  Omron  
  United Rentals 
  Rollins Inc. 
  PTC Inc 
  Duke Realty 
  Teledyne Technologies 
  Raymond James Financial 
  Cree Inc. 
  Packaging Corp. of America 
  Whirlpool 
  Textron 
  MKS Instruments 
  Hess Corp. 
   
Thu 28 Jan  Samsung 
  Mastercard 
  Comcast 
  Danaher 
  McDonald’s 
  Diageo 
  Mondelez 
  Altria 
  Sherwin-Williams 
  Air Products & Chemicals 
  Atlassian 
  Northrop Grumman 
  HOYA 
  Dow 
  Walgreens Boots Alliance 
  T. Rowe 
  Xcel Energy 
  ResMed 
  Fujitsu 
  Hyundai 
  Stanley Black & Decker 
  Southwest Airlines 
  Skyworks Solutions 
  McCormick & Co. 
  Rogers Communications 
  Arthur J. Gallagher & Co. 
  Canon 
  UPM-Kymmene 
  Dover Corp. 
  Advantest 
  Nucor 
  Western Digital 
  Celanese Corp. 
  NVR Inc. 
  Principal 
  Eastman 
  PulteGroup 
  WestRock Co. 
   
Fri 29 Jan  Eli Lilly 
  SAP 
  Honeywell 
  Keyence 
  Charter Communications 
  Caterpillar 
  SK Hynix 
  Colgate-Palmolive 
  M3 
  Atlas Copco 
  Ericsson 
  Johnson Controls 
  H&M 
  Phillips 66 
  BBVA 
  Simon Property Group 
  Astellas Pharmacy 
  Simens Gamsea 
  Komatsu 
  LyondellBasell 
  WeyerHauser 
  LG Electronics 
  Synchrony Financial 
  Church & Dwight Co. 
  Sun Pharmaceutical 
  SG Holdings 
  Telia 
  CAIXABANK 
  NEC 
  Svenska Cellulosa AB 
  Booz Allen Hamilton 

 

 

 

Salesforce a buy on $27.7bn Slack acquisition?

Investments

Cloud software pioneers Salesforce (CRM) is to buy work-chat service supplier Slack (WORK) for $27.7bn.

Slack will be the biggest acquisition that Marc Benioff-owned Salesforce has made to date. Shares dropped by around 5% upon the news, due to the size of the deal.

Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock under the deal. Salesforce agreed to pay a 55% premium to Slack stock’s November 24th 2020 closing price.

Based on the size of the deal, and its potential making Slack a major player in the business comms stakes, our rating on the Marketsx platform, based on analyst’s insights, is a strong buy.

At the time of writing, Salesforce avg. price target is now $291.53 – an upside of 21%.

The deal is to give both Slack and Salesforce a shot a levelling the playing field against current sector leader Microsoft. The Seattle-based software giant has been busy in lockdown, with Teams seemingly becoming the de facto software intra-business communications choice during the pandemic.

Microsoft can, however, boast a marketing budget to make Croesus blush, and already has elephantine brand recognition. Additionally, it has bundled Teams in its Office business software packages, which makes its ubiquity alongside other day-to-day standard apps like Word and Excel, less than surprising.

Slack, which launched in 2014, hasn’t had the backing that Teams can boast. However, governments and companies have been switching over to it in larger numbers as they seek out a nimbler alternative to email. Is email really in danger of becoming electronic snail mail? Probably not, as Outlook is pretty much industry standard, but with Salesforce’s backing and investment, Slack may see larger widescale adoption.

For instance, Salesforce could pull a Microsoft and package Slack alongside its other business software options to mirror Office 365.

Salesforce is casting a wider net of acquisitions. It picked up Tableau Software, a data analytics specialist, last year for cool $15.7bn and was even in the running to secure LinkedIn in 2016 before Microsoft hoovered up the social media platform.

Work-from-home enablers are particularly hot right now. But a vaccine is knocking on the door, with the UK approving the Pfizer BioNTech vaccine for mass roll out this week, so will people still be working from home as “normality” reasserts itself? Probably. The benefits are being widely felt, and there’s a general feeling amidst workers of all stripes that home working, with all its added flexibility, is the future.

Certainly, this all plays into Benioff’s vision of a world governed by cloud-based computing. Software as a service is very quickly becoming the model for developers and suppliers globally, so it stands to reason Salesforce is moving to shorten the gap between itself and Microsoft.

Salesforce reported October quarter earnings and revenue that topped analyst estimates following on from big investment gains on Snowflake stock.

As such, Salesforce earnings rocketed to $1.74 a share. Its gains from investments totalled 86% in latest earnings, the company said, with revenues rising 20% to hit $5.42bn.

Slack is due to report its Q3 2021 earnings after market close on Wednesday 9th December.

Week Ahead: Big tech earnings to drive pre-election volatility

Week Ahead

It’s set to be a volatile week for US markets as earnings season continues on Wall Street with Big Tech reporting. Apple, Amazon, Microsoft, Alphabet and Facebook are among the biggest names delivering their quarterly updates. Meanwhile central banks are in action aplenty with the Bank of Japan, Bank of Canada and European Central Bank all holding policy meetings. And we of course countdown to November’s US presidential election with all eyes on the Vix. 

Big Tech Earnings 

It’s a massive week for corporate earnings and the focus will undoubtedly fall on  the FAANGs with Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB) all set to report quarterly earnings figures on Thursday. Earnings come amid scrutiny on big tech as the US Department of Justice opened an antitrust case against Google’s parent company, Alphabet, which focuses on agreements it has made with handset manufacturers and carriers to be the default search engine on new phones. Whilst investors have shrugged this off so far, earnings may well provide fuel for greater volatility in the stock. 

Meanwhile there are fears that the case could create headwinds for Apple’s services business. The DOJ said Apple earns between $8 billion and $12 billion from Google, which would equate to between 17% and 26% of Apple’s revenues from Services last year. Apple recently released its iPhone12 but increasingly the reason for the stock’s higher multiples is about the ecosystem and Services revenues. Nevertheless, analysts remain bullish on these tech giants and they remain among the biggest winners YTDMicrosoft reports on Tuesday and there are dozens of large cap stocks reporting over the next few days. 

ECB  

With the euro gaining ground again versus the US dollar, attention in the FX markets will be on the European Central Bank (ECB) meeting on Thursday. Markets are increasingly betting on the ECB carrying out further easing in a bid to boost faltering economic growth and stagnant prices. The Eurozone slid into its second straight month of deflation in September and with further lockdowns being imposed across the bloc, the risks to the economic outlook have clearly deteriorated since the last meeting. The threat of a double dip recession is real, with Christine Lagarde saying recently that the resurgence of the virus is a clear risk to the economy. Given the murky outlook and dreadful inflation backdrop it seems all but certain the ECB will increase its bond buying programme by another €500bn by December. 

To get a flavour of the mood in the ECB, the usually hawkish Austrian central bank head Robert Holzmann, said recently: “More durable, extensive or strict containment measures will likely require more monetary and fiscal accommodation in the short run.” 

Meanwhile there are also meetings of the Bank of Japan and Bank of Canada taking place this week. 

Economic Data 

The advanced reading for US GDP growth in the third quarter will be the highlight as markets look for clues to the pace and sustainability of the recovery.  The economy is expected growth in the region of 30% as businesses reopened following lockdowns. The Atlanta Fed’s forecast indicates the economy will have expanded by 35% on a quarterly basis – but this of course masks the real damage when it’s coming off the back of a 31% drop in Q2. The GDP reading comes at an opportune moment for Donald Trump who will be able to proclaim that the economy is on fire. 

Election Watch 

The final straight: polling data may not change much – the number of undecided voters has been small. Biden commands a strong national lead but in the key battlegrounds that will determine the result it’s tighter. We’re hosting a special pre-election live event on Nov 2nd to run through how the markets might react.  

Top Economic Data This Week

Open the economic calendar in the platform for a full list of events.

Date  Event 
Oct 26th  German Ifo business climate 
Oct 26th  UK Nationwide house price index 
Oct 26th  US new home sales  
Oct 26th  SNB Chairman Jordan speaks 
Oct 27th  BoJ core CPI 
Oct 27th  US durable goods, core durable goods 
Oct 27th  US CB consumer confidence 
Oct 28th  Australia CPI inflation 
Oct 28th  Bank of Canada rate decision 
Oct 28th  EIA crude oil inventories 
Oct 28th  FOMC member Kaplan speaks 
Oct 29th  Bank of Japan policy statement & economic outlook 
Oct 29th  German preliminary CPI inflation 
Oct 29th  UK mortgage approvals & lending figures 
Oct 29th  US advanced GDP – Q3 
Oct 29th  US weekly jobless claims 
Oct 29th  ECB policy decision & press conference 
Oct 29th  US pending home sales 
Oct 29th  US natural gas storage 
Oct 30th  Tokyo core CPI 
Oct 30th  Japan industrial production 
Oct 30th  French flash GDP 
Oct 30th  German preliminary GDP 
Oct 30th  Eurozone CPI flash estimates 
Oct 30th  Canada GDP 
Oct 30th  US personal spending & core PCE price index 
Oct 30th  Chicago PMI 
Oct 30th  UoM consumer sentiment 

 

Top Earnings Reports This Week

Don’t forget to tune into our Daily Earnings Season Specials on XRay for more updates

Date  Company  Event 
26-Oct  SAP SE  Q3 2020 Earnings 
27-Oct  Microsoft Corp.  Q1 2021 Earnings 
27-Oct  Pfizer Inc.  Q3 2020 Earnings 
27-Oct  Ping An Insurance Co.  Q3 2020 Earnings 
27-Oct  Merck Co.  Q3 2020 Earnings 
27-Oct  Novartis AG  Q3 2020 Earnings 
27-Oct  Eli Lilly and Co.  Q3 2020 Earnings 
27-Oct  3M Co.  Q3 2020 Earnings 
27-Oct  AMD (Advanced Micro Devices) Inc.  Q3 2020 Earnings 
27-Oct  Caterpillar Inc.  Q3 2020 Earnings 
27-Oct  HSBC Holdings plc  Q3 2020 Earnings 
27-Oct  S&P Global Inc  Q3 2020 Earnings 
27-Oct  BP plc   Q3 2020 Earnings 
28-Oct  Visa Inc.  Q4 2020 Earnings 
28-Oct  MasterCard Inc.  Q3 2020 Earnings 
28-Oct  United Parcel Service Inc. (UPS)  Q3 2020 Earnings 
28-Oct  Amgen Inc.  Q3 2020 Earnings 
28-Oct  ServiceNow Inc  Q3 2020 Earnings 
28-Oct  Boeing Co.  Q3 2020 Earnings 
28-Oct  Sony Corp.  Q2 2020 Earnings 
28-Oct  GlaxoSmithKline plc (GSK)  Q3 2020 Earnings 
28-Oct  Gilead Sciences Inc.  Q3 2020 Earnings 
28-Oct  Anthem Inc.  Q3 2020 Earnings 
28-Oct  Equinix Inc  Q3 2020 Earnings 
29-Oct  Apple Inc.  Q4 2020 Earnings 
29-Oct  Amazon  Q3 2020 Earnings 
29-Oct  Alphabet  Q3 2020 Earnings 
29-Oct  Facebook Inc.  Q3 2020 Earnings 
29-Oct  Samsung  Q3 2020 Earnings 
29-Oct  China Life Insurance Co Ltd (A)  Q3 2020 Earnings 
29-Oct  Comcast Corp. (Class A)  Q3 2020 Earnings 
29-Oct  Shopify Inc (A)  Q3 2020 Earnings 
29-Oct  Sanofi S.A.  Q3 2020 Earnings 
29-Oct  AB InBev SA-NV (Anheuser-Busch InBev)  Q3 2020 Earnings 
29-Oct  American Tower Corp.  Q3 2020 Earnings 
29-Oct  Starbucks Corp.  Q4 2020 Earnings 
29-Oct  Shell (Royal Dutch Shell)  Q3 2020 Earnings 
29-Oct  Volkswagen (VW) St.  Q3 2020 Earnings 
29-Oct  Stryker Corp.  Q3 2020 Earnings 
29-Oct  China Petroleum & Chemical (Sinopec) (A)  Q3 2020 Earnings 
29-Oct  China Life Insurance Co. Ltd.  Q3 2020 Earnings 
30-Oct  China Construction Bank Corp.  Q3 2020 Earnings 
30-Oct  AbbVie Inc  Q3 2020 Earnings 
30-Oct  ExxonMobil Corp. (Exxon Mobil)  Q3 2020 Earnings 
30-Oct  Chevron Corp.  Q3 2020 Earnings 
30-Oct  Honeywell  Q3 2020 Earnings 
30-Oct  PetroChina Co Ltd (A)  Q3 2020 Earnings 
30-Oct  Postal Savings Bank of China Registered Shs -A-  Q3 2020 Earnings 
30-Oct  TOTAL S.A.  Q3 2020 Earnings 
30-Oct  AUDI AG  Q3 2020 Earnings 
30-Oct  Altria Inc.  Q3 2020 Earnings 
30-Oct  Colgate-Palmolive Co.  Q3 2020 Earnings 
31-Oct  Berkshire Hathaway Inc.  Q3 2020 Earnings 
31-Oct  Industrial and Commercial Bank of China Ltd (A)  Q3 2020 Earnings 
31-Oct  Industrial & Commercial Bank of China Ltd.  Q3 2020 Earnings 
31-Oct  China Merchants Bank Co Ltd.  Q3 2020 Earnings 
31-Oct  Bank of China Ltd  Q3 2020 Earnings 

 

Shell sold, Lloyds crumples, markets look to future post Covid

Morning Note

Shares in Shell slumped 7% as it cut its dividend and reported net income in the first quarter almost halved. Whilst BP chose to absorb a $6bn rise in net debt to $51bn and gearing above 36x in order to preserve its precious dividend, Shell seems to be taking a more prudent approach in cutting its dividend for the first time since the 1940s. Arguably BP is better placed to weather the storm, but Shell is taking the more sensible course of action. Shell’s gearing ratio is down to around 28x, a more comfortable level for Ben van Beurden than it is for Bernard Looney. This poses a simple question for investors – can BP keep it up? 

 

Shares in Lloyds sank 4% after profits collapsed in the first quarter and it significantly raised impairment charges. Profits before tax fell by 95% to £74m, as it raised credit losses provisions to £1.4bn. More worryingly for Lloyds is the 11% fall in revenues – if the housing market remains sluggish it’s got a lot of exposure to worry about and doesn’t have the investment banking arm to fall back on that Barclays does. The read across hit RBS, which is similarly exposed to credit impairments in the UK, with shares almost 4% lower.

 

The US economy shrank more than expected in the first quarter, declining by 4.8% and signalling the slowdown in Q2 could be well beyond estimates. Spain’s economy declined by 5.2% in the first quarter, marking the steepest contraction since records began in 1995. It was also worse than the ~4% decline expected.  

 

But the extent of economic destruction matters less to the market than the speed at which recovery will happen, so news from Gilead that its remdesivir drug can probably treat Covid-19 sent stocks into a strong rally. White House health advisor Dr Anthony Fauci gave it a cautious thumbs up, too. Global stock markets are looking to a world post-Covid-19, although the wider macro trade is less optimistic.

 

The S&P 500 rallied over 2.6%, closing 5 points above the important 61.8% retracement found at 2934, after the Gilead news. The Dow also rallied and is on pace for its best month since 1987. The broader S&P 500 is tracking its best month since Oct 1974. These are strange times for markets, but you have to look at the way in which tech is driving gains and how large caps can lean on central bank support. 

 

European markets jumped yesterday and are skirting around the flat line after almost an hour of trading as traders try to figure out whether there is any more left in this rally. I don’t think markets are going to want to retest the highs any time soon and profit-taking and renewed risk-aversion will likely see a pullback before long.

 

Last night the Federal Reserve warned of medium-term risks to the economy and signalled there is not going to be a V-shape recovery. Jay Powell did nothing to upset markets and suggested it was likely the Fed would need to do more. The European Central Bank will need to communicate a similar message of support today. 

 

Microsoft and Facebook earnings were very strong, beating estimates, but this does nothing but underline the relative safety to be found in high quality technology companies with strong balance sheets and resilience to lockdown measures. Facebook jumped 10% in after-hours trading as it said April showed some stability in ad revenues, echoing the statement from Alphabet.  

 

Oil continues to notch gains as the risk rally reflects hopes of the global economy opening up sooner, and after a smaller-than-feared build in US crude inventories. Front-month WTI rose above $17 in early European trade. US crude oil inventories rose by 9m barrels from the previous week less than the 11-12m expected and giving some flicker of hope to beleaguered oil traders. Domestic US production slipped, but not by a lot, falling to 12.1m bpd from 12.2m bpd a week before.  

 

Russia’s energy minister Novak said the country’s producers would cut output by 20% from February levels in May, while Norway is playing ball with the OPEC+ arrangement by reducing production by 13%. But demand falls still seem to exceed the capacity of the market to reduce supply. The International Energy Agency said Thursday that global energy demand will fall by 6% in 2020, and will be down 9% in the US and 11% in the EU.  

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