Early Morning Call: gold hits fresh 9-month high as market awaits US Q4 GDP

Equity market overview

Some equity markets reopened in Asia after the Lunar Year holiday.

The Hang Seng and Kospi posted strong gains. In South Korea, fourth quarter (Q4) gross domestic product (GDP) fell for the first time since Q2 2020, by 0.4%.

The market awaits US gross domestic product for the fourth quarter. Economists expect a 2.6% rise in Q4 quarter-on-quarter (QoQ). Also, at 1.30pm, initial jobless claims expectations are for 205,000 new claimants last week.

Durable goods orders are forecast to rise by 2.5% in December month-on-month (MoM). At 3pm, new home sales for the month of December are expected to fall by 2% MoM.

Earnings

The world's largest spirits maker Diageo said net sales rose 9.4% in the six months to 31 December, beating analyst forecasts for a 7.9% rise. Net sales grew 19% in North America, primarily driven by a favourable impact from foreign exchange. European net sales grew 13%.

Britvic recorded strong Christmas trading, with December revenue up 9%, led by the UK which showed a 13.8% increase. Its competitor Fevertree said full-year revenue rose 11% to £344 million and it expects revenue to grow between 13 and 18% in 2023.

In the US, Tesla shares rose by nearly 6% in extended hours. The electric car maker reported earnings of $1.19 per share after the US market close yesterday. That's four cents higher than analysts’ expectations. Revenue was just short of expectations at $24.32 billion.

In a call to investors, CEO Elon Musk said he expected a "pretty difficult recession this year," but demand for Tesla vehicles "will be good despite probably a contraction in the automotive market as a whole", adding that, absent external disruptions, 2023 deliveries could hit two million vehicles.

IBM posted earnings of $3.60 per share in the fourth quarter, broadly in line with analysts’ expectations. Total revenue was flat at $16.70bn in the period, compared with analysts' estimates of $16.13 billion. For 2022, IBM recorded revenue growth of 5.5%, its highest in a decade.

In terms of guidance, the company expects annual revenue growth in the mid-single digits on constant currency terms, weaker than the 12% it reported last year. Besides earnings, IBM announced 3,900 layoffs, or 1.5% of the group's workforce. The layoffs will cause a $300 million charge in the current quarter.

American Airlines is set to report its quarterly earnings before market open today. Analysts forecast EPS at 84 cents, estimates that American Airlines could easily top.

In a filing earlier this month, the airline company said it expected to earn between $1.12 to $1.17 per share in the period, far more than its previous estimate of 50 cents to 70 cents. These earnings will in any case represent a rebound from the $1.42 loss per share recorded in the same quarter last year.

Visa is expected to post its Q1 earnings after the closing bell tonight. Analysts anticipate earnings of just over $2 per share on revenue of $7.70bn.

The market also awaits earnings from Intel, Dow and Comcast.

On Friday, Chevron will report its earnings for Q4, and it is expected to post record profit for 2022, more than $37bn, double what it recorded the previous year. Ahead of its earnings, Chevron announced it was tripling its share buyback programme to $75 billion, with a quarterly dividend of 6%. It didn't set a timetable for the buybacks.

The announcement goes against last year's call by the Biden administration to invest in production to reduce energy prices for consumers and raise investments in renewable energy. Unsurprisingly, the White House wasn't long to express its disapproval. A White House spokesperson said that "For a company that claimed not too long ago that it was 'working hard' to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it."

Commodities

Yesterday afternoon the EIA reported a small increase in crude oil inventories. Crude stocks rose by 500,000, contrasting with the cumulative 27 million barrel increase of the first two weeks of the year.

Gasoline stocks rose by 1.8 million barrels, distillates stocks fell by 500,000.