Early Morning Call: gold enters bull market as dollar weakness continues
Gold is up on USD weakness while oil is holding recent gains. The picture is similar for base metals on continued hopes that China will deliver improved growth this year.
Equity market overview
While a great part of the APAC region observes Lunar Year holidays, equity markets in Japan and Australia rose overnight, following the lead of US indices.
Yesterday the Nasdaq Composite continued to outperform the Dow Jones and S&P 500, with a gain of 2.01%.
In Australia, NAB business confidence rose for a second straight month to -1 in December, from -4 the previous month. Economists expected the index to increase to 3.
In Europe the FTSE 100, DAX and CAC 40 open today’s session higher, building on the gains recorded yesterday.
Germany Gfk consumer confidence rose to -33.9 for the month of February, after -37.6 the previous month. Later this morning, Eurozone headline manufacturing PMI is expected at 48.5 versus 47.8 in December, services PMI is expected at 50.2 versus 49.8 in December, and the composite is expected at 49.8 versus 49.3 in December.
Later in the day, in the US, none of the PMI readings are expected to have reached the 50 level meaning that the services and manufacturing remain in contraction territory.
Earnings
Elsewhere on the equity markets, Associated British Foods posted a group revenue increase of 20% to £6.7 billion in the 16 weeks to 7 January.
Primark like-for-like sales rose by 11%, total sales by 15%, ahead of group expectations. Adjusted operating profit is forecast to be better than previously expected but lower than the previous year.
In the US, Johnson & Johnson is due to report fourth quarter (Q4) earnings before market open. Earnings are expected at $2.24 per share while revenue is expected to decline by 2.5% to $23.90bn. The group's pharma business is expected to grow as some J&J best-selling drugs are gaining market share, but this should be more than offset by forex headwinds.
Microsoft is scheduled to report its quarterly earnings tonight after the US closing bell. The market forecasts earnings of $2.30 per share, which would be a 6.7% contraction from the previous year, the weakest earnings growth since 2016. Second quarter (Q2) revenue is expected to come in just above $53bn, an increase of around 2.4% year-on-year (YoY), which would be the slowest top-line growth since June 2017.
In detail, Refinitiv estimates suggest that revenue for its 'More Personal Computing' segment may fall over 15.6% compared to the same quarter a year ago. The traditional PC market still faces headwinds, with global shipments still down 28% in Q4 YoY, according to an international Data Corporation survey. This will have a direct impact on Microsoft's Windows operating system businesses and productivity software. Likewise, its 'Productivity and Business Processes' segment is also expected to moderate further to 5.4% growth from previous 9.5%. Both segments account for a combined 59% of Microsoft's overall revenue. Investors will focus on the group's Intelligent Cloud segment, now accounting for 41% of overall revenue, and its fastest-growing business.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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