Our head of investment rounds up the morning's big news.
European markets have opened mixed, rounding up a difficult week after the US credit rating downgrade from Fitch.
The FTSE 100 is trading roughly flat - WPP (LSE:WPP) has plunged to the bottom of the UK blue-chip index after cutting its full-year guidance on the back of weaker tech client spending. Flutter Entertainment (LSE:FLTR) and Entain (LSE:ENT) are trading near the top of the FTSE 100 following strong results from DraftKings Inc Ordinary Shares - Class A (NASDAQ:DKNG) in the US which lifted its shares by over 12% after-hours.
All eyes are on the US jobs report at lunchtime which could providing clues into the strength of the labour market stateside as well as the Fed’s next move.
WPP has significantly lowered its full-year 2023 like-for-like growth forecast to 1.5-3% from 3.5% and reported a 2.9% decline in first-half pre-tax profit to £546 million. Meanwhile, the advertising group reported like-for-like revenue up 3.5% to £7.22 billion.
WPP is struggling with lower revenues from North America because of weaker spending from technology clients. After the slump in technology stocks last year, the sector has been carrying out major cost cuts this year such as cutting staff and reducing ad spending, with the latter hurting WPP. Plus the world’s second largest economy, China has also experienced a bumper than expected recovery out of Covid this year, which has been another headwind for the advertising giant.
Although shares had a strong start to the year, WPP has been under pressure since the February highs. The stock is extending losses in today’s trade, suffering a sharp slump, wiping out its year-to-date gain.
Amazon.com Inc (NASDAQ:AMZN) reported an 11% jump in second-quarter revenues to $134.4 billion, outpacing analysts’ expectations while quarterly profit hit $6.7 billion, almost double consensus forecasts, the biggest earnings beat since 2020. Amazon Web Services and advertising revenues both outpaced expectations and its sales guidance for the current quarter also came in better than expected.
Amazon’s low price point, speedy delivery e-commerce business is proving to be resilient to the macroeconomic headwinds, while its cloud computing division is also holding up thanks to ‘cost optimisation’. Its drastic cost cutting plan including 27,000 job reductions is helping the tech giant to boost its bottom line. The success of its Prime Day sales in July also allowed Amazon to issue rosy guidance for the third quarter. Amazon is looking to position itself as a key player in the growth of generative AI, a burgeoning theme that has generated a lot of excitement among investors this year.
Shares in Amazon surged 9% after-hours last night, adding to its impressive year-to-date performance, marking a strong rebound after the 2022 ‘tech-wreck’ which heavily punished the sector. However, shares still have a long way to go to reclaim their 2021 Covid-era highs.
Apple Inc (NASDAQ:AAPL) reported total quarterly revenues of $81.8 billion, down 2% year-on-year, the third consecutive quarterly decline, but meeting analyst expectations. The all-important iPhone saw sales fall to $39.67 billion, coming in below consensus forecasts. It expects total revenue to fall again in the September quarter, a similar performance to the June quarter. Services revenue however was a bright spot enjoying strong growth up 8% to $21.21 billion with strong sales in China. Apple has been investing heavily in artificial intelligence too as part of its increased research and development spend.
iPhone sales struggled in the fiscal third quarter, mostly due to foreign exchange headwinds. However, hardware sales more broadly were lower including for iPhones, Macs and iPads as the macroeconomic headwinds weigh, raising concerns about a lengthening upgrade cycle, particularly for smartphones.
The June quarter tends to be Apple’s worst period for sales each year, as customers generally wait for new product launches in autumn. But the tech giant pointed to further weakness in the current quarter, weighing on shares after-hours. Offsetting this to some extent was a strong performance in its services division including the hugely popular streaming platform Apple TV+. Impressively, services managed to surpass the 1 billion users milestone worldwide.
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