Global markets were up on Friday, as US markets (S&P 500 Index, +1.4%) welcomed strong tech earnings, despite lingering concerns around high inflation and recessionary risks.
Markets have rebounded strongly in July, with the S&P 500 Index up +9.1% and the NASDAQ Index rising +12.4%, the largest monthly gains since 2020. On one hand fears of further aggressive interest rate hikes have eases and there is a growing view that inflation could have peaked. More importantly, while there have been a wide range of outcomes, tech stocks have reported stronger than expected earnings results so far, with all the mega cap names – Alphabet, Apple, Amazon, and Microsoft rallying post result, with the exception being Meta (Facebook).
Closer to home, both the Australian and New Zealand markets were up 5.8% for the month.
Amazon jumped +10.4%, while Apple rose +3.2% Friday after posting better-than-expected iPhone revenue. Chevron (+8.9%) and Exxon Mobil (+4.6%) were also up strongly after posting better-than-anticipated results for the previous quarter. Again it wasn’t all good news for less established names, with Roku slumping 23.1% after missing expectations and warned slowdown in advertising, while chipmaker intel dropped -8.6% on their earnings miss.
European markets (Stoxx 600 Index, +1.3%) were up led by oil and gas stocks. Despite record inflation and escalating gas crisis the Eurozone economy rose +0.7% in the second quarter, beating expectations of +0.2%
Amazon (AMZN:NASDAQ)
Amazon jumped +10.4% after posting strong quarter earnings and better-than-expected third quarter earnings, following a weak result from Walmart and Meta earlier in the week which had set expectations low for Amazon’s e-commerce and advertising businesses. Group revenue rose +7% from last year bucking the trend from some big tech peers helped by another strong quarter for it’s Amazon Web services and Advertising businesses both having revenue rise +33% and +18% respectively.
In light of cost inflation and excess staff and warehouse capacity Amazon had slashed 99,000 jobs, as online shopping slowed since the peak of the pandemic its core e-commerce business and reported a -4% decline in revenue.
We remain Buy (High Risk) rated on Amazon and believe its key driver of growth will come from it’s Amazon web services and advertising business.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.8%) was up on Friday, following global rally as investors risk appetite improves despite the US economy entering into a ‘technical recession’.
Most sectors were higher led by real estate and utilities. Zip Co shares fell -25%, to end its week up +29%. Origin Energy rose +4.2%, after reporting its revenue doubled from its holding in Australia Pacific LNG project.
The New Zealand market (NZX 50 Index, +1.4%) was up strongly again on Friday.
Mainfreight continued its run by adding another +2% as equity markets continue it’s rebound.
Pacific Edge was placed into a trading halt on news that its Cxbladder product had been mentioned in a draft proposal from healthcare provider Novitas to possibly no longer be covered and eligible for healthcare insurance reimbursement (a major hit for the company).
3 Things Markets will be Watching this Week
- US Corporate Earnings continue, with nonfarm payroll (employment) data in the US out later in the week.
- The Bank of England’s rate decision and PMI manufacturing surveys across the globe.
- Locally, reserve Bank of Australia’s cash rate decision.