Surprise, surprise: Microsoft failed to meet investor expectations when it announced its Q2 results yesterday. Both revenue and earnings beat expectations, but the company reported a decelerating demand for its cloud computing services to 26%, and projected Azure to grow between 25%-26% for the current quarter. We are far from the 35% growth that we got used to in the good old days. Microsoft stock plunged up to 4% in the afterhours trading. Alphabet on the other hand a strong quarter for its search business advertisement, hinting that Google search withstood so far with the AI competition and its cloud business posted a 28% growth, more than Microsoft’s. Google shares jumped 6% after the bell. Elsewhere, Snap tanked almost 20% as the overall sales declined and the forecasts remained short of analyst expectations, while GM lost 3.50% yesterday after raising its earnings forecast. But there is a catch: the forecast holds only if the workers don’t go on a strike, and according to Evercore ISI, the chances of a strike is about 50-50. Today, Meta, Coca-Cola and Boeing will be among the big names that will report their earnings. The S&P500 advanced to the highest levels since April 2022, while Nasdaq 100 was up by 0.73% yesterday.
IMF raises global growth outlook
Zooming out, the IMF raised its outlook for the world economy this year and it now expects the global GDP to expand 3% in 2023. But it also warned that Germany will probably be the only G7 economy to suffer an economic contraction this year. Of course, the IMF also warned that there are some risks to their optimistic forecast, including the higher interest rates, the Chinese recovery that doesn’t come, the debt distress and shocks from war and climate related disasters. But all in all, the US economy will likely end this year as the champion of soft landing – if all goes well.
I insist – if all goes well – because PacWest has been the latest US regional bank to succumb to this year’s bank stress and its shares plunged 27% after Banc of California agreed to buy it.
Decision time
Anyway, positiveness around the US economy is obviously giving some hawkish ideas to the Federal Reserve (Fed), which will likely announce another 25bp hike today, and warn that there could be more in the store. The US 2-year yield is in a wait-and-see more near the 4.90% level, either it will go back above the 5% with a hawkish Fed statement or it will retreat toward the 50-DMA, near the 4.65%, with a reasonably hawkish Fed statement, if the Fed opts for another ‘skip’ for example. The US dollar index pushes higher as expectations for other central banks soften due to the softer-than-expected economic data suggesting softer action from the likes of European Central Bank (ECB) and the Bank of England (BoE) in the coming months. The EURUSD continued its nosedive yesterday on IMF’s less than ideal Germany outlook and the news that corporate loan demand plunged by the most on record in Q2, as higher rates started to bite European businesses.
Unfortunately, however, inflation expectations are getting stronger globally as the rising energy and crop prices hint that the upcoming inflation figures won’t be a piece of cake. The barrel of US crude flirted with the $80pb level on Chinese stimulus hopes and the pricing of a soft landing, while wheat futures continue rising along with the escalating tensions in the Black Sea and Danube. Corn and soybean futures rise as well as hot weather in the US belt is adding to the positive pressure for corn.
, which will likely announce another 25bp hike today, and warn that there could be more in the store. The US 2-year yield is in a wait-and-see more near the 4.90% level, either it will go back above the 5% with a hawkish Fed statement or it will retreat toward the 50-DMA, near the 4.65%, with a reasonably hawkish Fed statement, if the Fed opts for another ‘skip’ for example. The US dollar index pushes higher as expectations for other central banks soften due to the softer-than-expected economic data suggesting softer action from the likes of European Central Bank (ECB) and the Bank of England (BoE) in the coming months. The EURUSD continued its nosedive yesterday on IMF’s less than ideal Germany outlook and the news that corporate loan demand plunged by the most on record in Q2, as higher rates started to bite European businesses.){kind=link}