It's one of the biggest weeks of the year for corporate results on both sides of the Atlantic. Our head of markets looks at some of the companies reporting this week and how results season has gone so far.
Earnings season goes into overdrive on both sides of the pond this week, with big tech in the US and banks in the UK particular points of interest.
In the year to date, the Nasdaq index has added 15.3% after a torrid 2022, and has been something of a poster child for resilient earnings in the face of peaking interest rates. Microsoft Corp (NASDAQ:MSFT) and Apple Inc (NASDAQ:AAPL) have been large contributors to tech gains with jumps of 19% and 27% respectively this year, and each report over the next two weeks.
In addition to the Microsoft numbers this week, further colour will be provided from the likes of Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL) and Meta Platforms Inc Class A (NASDAQ:META) in the tech space. The additional possibility of further staff reductions in an effort to bolster margins could also feature, while any profit outlook projections from these corporates will be under particular scrutiny.
The raft of earnings is not restricted to the tech sector, however, and a much broader picture of corporate health or otherwise should emerge when the likes of General Motors Co (NYSE:GM), McDonald's Corp (NYSE:MCD), Boeing Co (NYSE:BA), Caterpillar Inc (NYSE:CAT), Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) provide updates on their own performance over the first three months of the year.
The earnings season so far has broadly beaten expectations, although the bar was set extremely low this time around. The true impact of the Federal Reserve’s tightening policy, which has still yet to be fully proven in economic terms, is also yet to permeate corporate earnings in any meaningful way. That being said, growing fears of an earnings recession are never far away, with investors trying to anticipate any worsening of trading conditions.
Going in to such a busy week and with recessionary concerns still at the top of the agenda for investors, the other main indices are holding onto gains for the year, with the Dow Jones ahead by 2% and the S&P500 by 7.7%.
US GDP numbers will also be a feature of focus later in the week, with growth expected to have slowed only slightly from the previous reading. A survey of US business activity further clouded the picture with a strong report, although the likelihood of a further 0.25% Fed hike in May has all but been factored in by investors.
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Asian markets had a mixed to negative start to the week, with the exception of Japan, where the first monetary policy meeting under the new head is expected to reveal that the country does not intend to alter its divergence from much of the rest of the developed world in terms of policy. As a result, the yen has felt some weakness over recent weeks, with the Bank of Japan maintaining an easy monetary policy.
The UK is also subject to a sharp acceleration in company updates this week, with the banks in sharp focus.
The recent round of US banking updates revealed a stoic response to the recent turmoil in the sector and hopes will be high for a similar response from the UK counterparts. Net interest income and margins will continue to be a feature amid the rising interest rate environment, while any deterioration in credit quality and further debt provisions could unsettle sentiment.
By the same token, the previous measures which the banks have taken in strengthening their defences has left a sector with not only financial strength, but also the possibility of further announcements of shareholder returns either in the form of buybacks or increased dividends.
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Updates are also expected from a range of companies which will each contribute to the overall financial jigsaw in establishing the current health of corporates, ranging from Sainsbury (J) (LSE:SBRY) and Primark owner Associated British Foods (LSE:ABF), to more defensive companies such as Unilever (LSE:ULVR) and Reckitt Benckiser Group (LSE:RKT).
In the meantime, with such a full agenda to unfold over the week, the FTSE100 was off to a tepid and cautionary start, with oil and mining stocks consequently out of early favour. The index remains ahead by 5.9% in the year to date, although tests will continue to arrive thick and fast amid the imminent wave of economic and corporate releases.
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