Closing Report 28.10.2021

solid earnings drive markets upward

AMERICAN MARKETS MID DAY

United States major stock markets  started the week higher to new record high as investors were anticipating strong earnings report from the technology heavyweights especially after statistics showed that 84% of the companies in the S&P 500 that posted their earnings exceeded analyst expectations. On the business front, Paypal annouced that abandonned the acquisition of Pinterest and ending days of speculation over a $45 billion deal meanwhile Tesla share price rose after receiving an order for 100 000 cars from Hertz. On Tuesday, stock indexes in the region extended their gains after Facebook reported a strong yearly gain on Monday after session with a quarterly revenue at $29.01 billion, jumping 35% compared to the same quarter in 2020. Meanwhile, all 3M Co, Eli Lilly and Co, Raytheon Technologies Corp and Universal Parcel Service Inc observed annual rises in their revenues. On Wednesday, markets traded mixed with Twitter, Microsoft and Alphabet recording increases in revenues and reasserting their dominance in the tech space while Democrats struggle to find ways to increase taxes. Kryptonite for big-tech has always been raising taxes and regulation.  With Senator Joe Manchin showing little openness for tax increases, tech stocks are soaring. Also, Visa fell by 6.92% after it wasreported that the company is under a US Department of Justice investigation. Today at European closing time, Wall Street extended gains as traders are optimistic about Amazon.com and Apple earnings release today after the trading session, while the Nasdaq 100 is hitting new record higher. In the mean time, US president Joe Biden announced a $1.75 trillion framework for his Build Back Better Act, saying he is « confident » the legislation can pass both chambers of Congress soon. On business news, Ford Motor Co jumped 11.2% after the carmaker topped third-quarter profit estimates and raised its full-year earnings forecast while Caterpillar Inc added 2.9% after reporting a quarterly profit on high commodity prices.

EUROPEAN MARKETS CLOSING

Major European markets mixed lower on Monday as the Business Climate Index for Germany stood at 97.7 in October, representing a monthly decrease of 1.2 points while the European Central Bank and the Bak of England both warned of a « downward » economic outlook and risks of inflation. Also, United Jingdom Chancellor of the Exchequer Rishi Sunak will propose raising the minimum wage in the country from £8.91 to £9.50. In France, shares in BNP Paribas rose to 3-years highs while shares in Virbac SA rose to all-time highs. On Tuesday, indexes in Europe closed higher after the Swiss bank, UBS, reported a net profit of $2.3 billion, an increase of 24.2%, in the third quarter, its highest quarterly report in six years. Meanwhile, Novartis announced that its net sales for the third quarter of 2021 increased 5% when compared to the same period last year to stand at $13 billion. On Wednesday, major European markets closed with losses after  British Chancellor of the Exchequer Rishi Sunak said that UK has to work amid « a challenging backdrop » of rising inflation. On the business front, the banking system continued its positive earning season with Banco Santander and Deutsche Bank, both beating estimates. European indexes ended the day mixed as the European Central Bank (ECB) stated that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.

ASIAN PACIFIC MARKETS CLOSING

Shares in Asia-Pacific region started the week slightly down with attention focusing on the latest COVID-19 outbreak in China. On hte business front,HSBC noted a rise in it’s total quarterly revenue, while the Australian company, Telstra, is set to acquire Digicel Pacific in a $1.6 billion deal. On Tuesday, stocks in the region went up as China’s Vice Premier Liu He talked with US Treasury Secretary Janet Yellen via video call about the macroeconomic situation and bilateral relations. In addition, Hyundai’s quartelry profit missed estimates but still came above last year’s numbers. On Wednesday, worries over inflation and corronavirus spread drove the Asian markets down. In addition,  a top Chinese regulator warned that companies should make “active preparations” to meet payments on their offshore bonds and also  required China Evergrande Group’s founder Hui Ka Yan to use his personal wealth to alleviate the firm’s debts. Asian stocks extended their losses this morning as inflationary pressures continue to bite and after the decision of the Bank of Japan (BoJ) to leave its interest rate unchanged in its latest policy meeting. Meanwhile, rising numbers of COVID-19 cases in countries, including an “unusual surge” in Singapore, also continue to be of concern to investors. On the business front, Samsung revealed in its income statement that its operating profit jumped to the highest level in three years  in the third quarter of 2021, landing at 15.8 trillion won ($13.4 billion) which marks a year-on-year jump of 28% and a quarter-on-quarter jump of 25.9%.

COMMODITIES & FOREX MARKETS

• Commercial crude oil inventories in the United States, which are not taking into account those in the Strategic Petroleum Reserve, rose by 4.3 million barrels to 430.8 million barrels in the week ending October 22, the US Energy Information Administration (EIA) reported on Wednesday.
• The euro rose sharply against the U.S. dollar on Thursday as foreign currency traders sorted through moves in the interest rate markets and comments by the European Central Bank President Christine Lagarde.
• El Salvador, the country that made bitcoin legal tender alongside the U.S. dollar, has bought the dip again. The Salvadoran government has purchased a total of 1 120 bitcoins, currently worth more than $68 million.

China and Australia are still good trading partners 

Relations between China and Australia deteriorated sharply last year after Australia backed a call for a global investigation into China’s treatment of the original Covid-19 epidemic.
This ranged from the imposition of tariffs to the imposition of other bans and restrictions – with an impact on Australian goods, including barley, wine, beef, cotton and coal. “Australia’s increasingly fractious trading relationship with China has been a key downside risk to the outlook over the past year,” said Sean Langcake, principal economist at Oxford Economics. However, trade between the two countries held up as Autstralia is one of the few developed countris that enjoys a trade surplus with China, its largest trading partner.
According to Oxford Economics, the worst-affected commodities include timber, seafood, beverages, cooking oil, coal, textiles, footwear, cereals and sugar. Australian officials have criticized China for the trade sanctions. On Tuesday, the WTO said it had agreed to set up a panel to review China’s tariffs on imported Australian wine, according to Reuters. Despite the sanctions, Australia has managed to redirect its exports of banned goods to other countries.
“The key question throughout this episode for exporters is their ability to turn to alternative export destinations if they encounter barriers when exporting to China,” said Mr. Langcake. One example is coal, which gained attention as China’s restrictions on Australian coal remained in place, despite the country’s worst electricity crisis in years due to stock shortages.