By Deepta Bolaky
 @DeeptaGOMarkets

Weekly Summary 

Geopolitics 

US-China

Trade optimism revived risk sentiment on Tuesday after a slow start to a busy week. It was reported that top US trade officials and Chinese negotiators would meet face to face next week to revive talks.

The meeting will take place in Shanghai, and it will be a two-day talk which will begin from next Tuesday. Given that trade negotiations have stalled for months, investors welcomed the positive move and pushed riskier assets higher.

UK-Iran

Tensions in the Middle East increases with the seizure of a UK-flagged oil tanker in the Persian Gulf. The UK and Gibraltar seized an Iranian tanker attempting to transport oil to Syria early July, and it may be an attempt to exchange the vessel.

The UK Royal Navy will now accompany British-flagged oil tankers through the Strait of Hormuz. Global oil prices were volatile as traders were driven by issues in the Gulf and mixed fundamentals.

The current situation poses a threat to the global trading system, and investors will likely continue to keep an eye on any developments. 

North Korea

The North Korea missile launches renewed fears in Asia and across the globe. It is reported that the short-term projectile was a “solemn warning” to South Korea. The US-South Korean military drills are the leading cause of conflict. 

Central Banks

Amid the global run towards easing policies, this week, the focus was on the European Central Bank (ECB). We saw a mixed message from Mario Draghi. While he maintained a dovish stance, the different nuances of views tampered the extent of dovishness.

“The risks surrounding the euro area growth outlook remain tilted to the downside, reflecting the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism, and vulnerabilities in emerging markets.”

Mario Draghi stated there was not any discussion of the size of a potential cut- the discussions were based on two factors:

• “Current growth outlook, and current and projected inflation; and
• How to Design this preparation.”

However, the change in the statement whereby the ECB expects the interest rates to remain “at their present or lower levels” at least through the first half of 2020 has signalled a probable rate cut in September.

The Euro dropped to levels closed to two-year lows, but the underwhelmed dovish comments revived the appetite for the shared currency. The EURUSD pair moved within more than 80 pips before settling around the 1.1140 level.

EURUSD (Hourly Chart)

Source: GO MT4

In the stock market, muted bullish comments sent European shares lower. Major European Indices finished the day in negative territory as investors look for the next meeting for more clarity on the interest rate outlook.

Source: Bloomberg Terminal 

Earnings

As the week progressed, earnings went from being strong to mixed. More companies from the FAANG Group reported their second-quarter results this week.

Amazon:

Amazon reported its quarterly updates after the closing bell, and shares of Amazon slipped by 2.5% in the after-hours trading. The company saw earnings of $2.6bn, and revenue was $63.4bn which is up from the $52.9 billion a year ago. However, the figures came below estimates, and it is the first time Amazon reported income below analysts’ consensus.

The main highlight for Amazon was Prime Day, which was the largest shopping event in Amazon history. The weaker-than-expected profit is mostly due to the investment in expediting deliveries to Prime customers which the company previously announced. The actual cost of speeding shipping was higher than anticipated and it will be one of the key metrics investors will be monitoring for the next quarter.

Third Quarter 2019 Guidance 

• Net sales are expected to be between $66.0 billion and $70.0 billion or to grow between 17% and 24% compared with third-quarter 2018. This guidance anticipates an unfavourable impact of approximately 30 basis points from foreign exchange rates.
• Operating income is expected to be between $2.1 billion and $3.1 billion, compared with $3.7 billion in third quarter2018.
• This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

Google:

Google’s parent company, Alphabet, reported higher than expected revenue at a time where the tech giant is facing increasing scrutiny from the US regulators. The second-quarter revenue is $38.9 bn, which is a rise of 19% compared to 2018 Q2. Its share price rose more than 7% in the after-hours trading.

Facebook:

Facebook’s earnings beat forecasts despite data scandal. The 2019 figures include an additional $2.0 billion legal expense related to the U.S Federal Trade Commission (FTC) settlement.

“We had a strong quarter and our business and community continue to grow,” said Mark Zuckerberg, Facebook founder and CEO. “We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services.”

We also note that Facebook struck a $5 billion settlement with the FTC following the 2018 Cambridge Analytica scandal.

Shares were on the downside despite upbeat results as the CFO expects “more pronounced deceleration in the fourth quarter and into 2020, partially driven by ad-targeting related headwinds and uncertainties”.

All in all, it was a volatile week in the stock market. We saw record highs on Wall Street with S&P500 and Nasdaq Composite. The momentum died down towards the end of the week with mixed earnings, and less-dovish central banks.

US500 (S&P500) – 15 Mins Chart

Source: GO MT4

 

Monday, 29 July 2019 Indicative Index Dividends Dividends are in Points
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
0	0	0.012	0.029	0	0	0.393
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
3.402	0	0	0	0	0	0.512

Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.