Early Morning Call: Europe expected up; Nike earnings; energy market

Equity market overview

Equity markets started the week in positive territory, following Friday’s US stocks rally.

Hong Kong’s Hang Seng TECH Index ETF leads gains in the region and the ASX 200 ended the session close to 2% higher. Europe also opens in positive territory.

In China, the latest data shows industrial profit growth is slowing as high raw material prices and supply chain issues continue to disrupt factory activity and squeeze margins. During the first five months on the year, profits earned by China's industrial firms increased by only 1% compared to the same period in 2021. Last month the year-to-date increase was 3.5%.

Elsewhere, Russia yesterday failed to make a $100 million interest payment, marking its first debt default since 1998. Russia was on an inevitable path to default since sanctions were first imposed by the US and European Union (EU). These restricted the country's access to the international banking networks which would process payments from Russia to investors around the world.

Currency markets

On the currency market, the greenback is losing ground mainly against the Australian dollar and the yen. Markets are awaiting US durable goods orders for the month of May and pending home sales.

Equities

Nike reports quarterly earnings tonight and is expected to show a fall in quarterly revenue.

According to the mean estimate from 22 analysts, the group is forecast to report a 2.2% decrease in revenue to $12.07, and earnings of 81 cents per share. For the same quarter last year, the company reported earnings of 93 cents per share.

Nike is no exception. Like other retailers, the company has been facing a series of headwinds in the past few quarters: factory shutdowns in China and Vietnam which have affected supply chains, and followed by port congestion in the US, have affected not only sales but also margins.

Analysts are also aware that a strong US dollar will have an impact on sales made outside the US.

Also reporting later this week are Micron Technology and General Mills on Wednesday, and Walgreens Boots Alliance and Constellation Brands.

Commodities

The commodity sector remains very much under close watch, after suffering heavy losses last week. Investors are trying to assess by how much global demand will be impacted by a potential recession.

The oil market is little changed this morning, after recording a third straight week of decline. Last Friday, the Baker Hughes total rig count increased by 13 to 753. As Usual, this rise was mainly due to the increase in number of oil rigs in operation, up to 594 from 584. The number of operating gas rigs increased by three to 159.

Copper, zinc and lead are rebounding this morning, showing gains in excess of 1%.