Imperfect results from Big Tech overnight is setting up another difficult day on Friday, when Big Oil reports and the Eurozone releases Q3 GDP data.
- Dow futures point lower after Apple and Amazon stocks drop afterhours
- Eurozone reports Q3 Friday
- Facebook reports user decline, Alphabet beats estimates
- Big Oil, NatWest report Q3 earnings on Friday
- US reports record GDP gain in Q3 after record bust
- ECB gears up for more stimulus in December
On Friday, European markets look set to open lower with Futures point to losses on Wall Street. Stock markets avoided more sweeping losses on Thursday. In Europe, the FTSE and CAC were flat while the DAX rose +0.32%. Wall Street saw strong gains with the S&P 500 up +1.19% and Dow up 139 points or +0.52%. Oil prices unchanged while gold struck a 1-month low and the dollar held onto Wednesday’s gains.
Early concern about the implications of the new lockdown measures in France and Germany gave way to some optimism stateside. US GDP figures showed a strong recovery growing a record 33.1% that topped estimates of 32%. The US economy is still 3.5% smaller than it was in January and who knows how much smaller it will be if/when there is the next lockdown and reopening.
The ECB gave as a strong a hint as you’ll get from a central bank that more policy easing is coming in December alongside the next economic projections. We see a good chance the ECB has to act before December, perhaps intra-meeting with spiking COVID infections and in the absence of any movement on the EU rescue package. On the basis the ECB will move before the Fed, we could see EUR/USD revisit 1.15.
Big Tech reported results after the close on Wall Street – that was Apple, Amazon, Alphabet, Facebook- and Twitter. Early reactions don’t look as positive as they might need to be to keep this market afloat. The trend this earnings season has for been for companies beating estimates to be left unrewarded by stock gains because investor attention is all on the election and COVID.
Apple offered no guidance on iPhone 12 sales over Christmas, Facebook reported a decline in US MAUs and Amazon is expecting a big jump in costs with uncertain holiday sales. These things are not the perfection the stocks are priced for. The exception to the rule is Google-owner Alphabet which bested estimates thanks to strong growth in advertising revenues.
The day head will see Q3 GDP updates from across Europe as well earnings from Big Oil companies like Exxon as well as UK bank NatWest.
Germany is expected to see quarterly growth of 7.3% in the third quarter that leaves it down -5.3% on a year ago basis. For the broader Eurozone, a recovery of 9.5% q/q in Q3 after an 11.8% decline in Q2 is expected. It would display a big recovery but it all feels bit in vein if lockdowns send it back lower in the current quarter.
Exxon Mobil earnings
Exxon reports before the open on Friday. Consensus EPS is -$0.24 and revenue is $48.36 billion (-25.7% y/y). The company just announced 1900 job losses in the US following an earlier announcement of 1600 job cuts in Europe. The company is trying to pull in costs to weather the demand destruction of the pandemic. For investors that means Exxon not raising its dividend for the first time in 18 years, potentially the precursor a divi cut if the cost-cutting isn’t enough. Other oil giants Chevron and Total report results Friday.
NatWest is expected to return to profitability with adjusted profits of £166m after a £939m loss in Q2. The trend across banks in Q3 has been to reduce impairment charges after a quarter of economic recovery. Net interest income could be down in the region of 1% to £1.88nm, down 6% y/y.