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Early Morning Call: equity markets down while FedEx warns of slowdown

FedEx pulls annual earnings guidance and warns of falling volumes worldwide. GBP lower amid worse than expected UK retail sales. Gold crashes through support to near 28-month lows, technically little to stop it down to $1451.

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Equity markets in Europe opened the session in the red, following the lead of the US and Asia-Pacific region, as FedEx Corp warned its businesses have neem affected by the global economic slowdown.

Macro-economic overview

As China is still dealing with an ailing property market and the impact of COVID curbs, the country published better-than-expected macroeconomic data. Industrial production increased by 4.2% in August from a year earlier, the fastest pace since March, beating expectations of a 3.8% expansion.

Retail sales rose 5.4% from a year ago, beating forecasts for 3.5% growth, while fixed asset investment grew 5.8% in the first eight months of 2022 from the same period a year earlier, above a forecasted 5.5% rise and up from January-July's growth of 5.7%. This had little impact on the yuan. USD/CNH now trades at a 26-month high.

Reserve Bank of Australia (RBA) governor, Philip Lowe, said overnight that interest rates are closer to normalisation. "At some point, we will obviously not be increasing rates by 50-basis points (bps) at each meeting, and we're getting closer to that point," Lowe told a parliamentary economics committee, adding "we are at 2.35%, so we're getting closer to the range that you think is normal but we're probably still on the low side."

In just five months, the RBA has raised its key cash rate by 225 basis points to a seven-year high.

UK retail sales fell more than expected in August, by 5.4% on a year-on-year (YoY) basis. It is the biggest decline so far this year, as sales fell in all main sectors.


FedEx shares tanked in extended trading yesterday after a warning that its fiscal first quarter (Q1) results were hit by a fall in global volume and withdrawing its financial forecast.

A week before publishing its fiscal Q1 earnings, FedEx said it expected to post earnings of $3.44 per share, well below analysts’ consensus of $5.17. It said revenue should also fall short of expectations at $23.20 billion.

According to FedEx, the global slowdown accelerated in August, and is expected to continue though the current quarter. So far the group estimates these headwinds to be responsible for a $500 million fall in revenue at FedEx Express, and $300m at FedEx Ground.

FedEx CEO, Raj Subramaniam, said in a statement that "Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations."

FedEx says it will shut some office locations, reduce the number of hours worked, and consolidate some sorting facilities. The warning had a ripple effect on its competitors and retailers.

Another big drag on stocks on Wall Street yesterday was digital media and marketing software firm, Adobe Systems Inc. While it topped the earnings target for its fiscal third quarter (Q3), sales were a bit below expectations. But the real reason it fell was on the news that it is to acquire Figma, a web-first collaborative design platform, for about $20 billion.


Gold is on track to post its worst week in two months, after falling yesterday to a 28-month low. The precious metal started falling on Tuesday after US consumer price index (CPI) unexpectedly rose in August, a bearish momentum that could continue until the Federal Open Market Committee (FOMC) meeting next week.

Markets are currently pricing in a 75-basis-point Federal Reserve (Fed) rate hike.

Oil prices are little changed this morning as the market awaits Baker Hughes data. Last week, Baker Hughes total rig count fell by one to 759, due to a fall of the number of oil rigs in operation. The number of producing oil rigs fell by five to 591, while the number of gas rigs rose by four to 168.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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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