Global Market Report - February 1, 2018

Global investors were braced for results from Google, Amazon, Alibaba and Apple

Morningstar 02/02/2561

Asia

Markets in the region moved did not move in one direction on Thursday, especially with a muted performance from US equities on Wednesday night.

Global manufacturing surveys were released on the first day of the new month, and these included the Caixin report for January, which showed the sector continued to expand.

Nevertheless, this was not enough to stimulate Chinese investors’ risk appetite – the Shenzhen index was off nearly 3% to below 11,000 points. Hong Kong’s recent strong run stumbled on Thursday.

Japan was a different story, however, with a strengthening of the dollar against the yen helping sentiment towards equities. Japan’s price-weighted Nikkei rose nearly 400 points to 23,486, while the market-cap weighted Topix rose nearly 2% to 1,870 points.

Europe

The UK corporate scene was busy on Thursday with full-year results from FTSE 100 heavyweights Royal Dutch Shell (RDSB) and Unilever (ULVR). Shell, despite more than doubling annual profits and beating forecasts, was lower on Thursday morning as the market turned against dollar earners after another surge in sterling. Vodafone (VOD) quarterly results were not received well either, with a near 5% fall in UK revenue turning off investors.

In UK economics, manufacturing PMI figures were a touch softer than expected. Nationwide’s house price survey for January defied the recent softening trend among similar surveys. January house prices were 3.2% than in January 2017, according to the mortgage lender.

In the eurozone, Italy’s FTSE MIB was the pick of the exchanges in percentage terms as the country’s manufacturing sector growth beat forecasts.

North America

Janet Yellen bowed out as chair of the Federal Reserve last night. The raised inflation outlook caught bond markets on the back foot, pushing up 10-year Treasury yields to 2.74%, a rise of three basis points. Interest rate futures are now pricing in three more rate hikes this year rather than two, with four interest rate hikes now conceivable by market observers. The recent rise in global bond yields is a recent trend that has threatened to destabilise the stock market bull run as it moves into another year.

Facebook (FB) released earnings numbers last night were nuanced: on one level the social media giant revealed a $2 billion tax charge from recent reforms and revealed that users were spending less time on the site after changes to the news feed. However, during the earnings call to analysts the company’s stock price hit a record of $194 as Facebook said its ad prices had risen 43%.

Today is the main day for US tech earnings, with investors having to scrutinise results from Google parent company Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL). These results are after the market closes, but investors will have a view of Chinese internet giant Alibaba (BABA), Ferrari (RACE), and Conoco Phillips (COP) among others before the opening bell.

US and Canada manufacturing figures for January will also be in view.

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