Big tech sinks stock market in runup to earnings
US equities ended a five-day winning streak on Tuesday (27 July) as mega-cap technology stocks tumbled ahead of their earnings reports.
The tech-heavy Nasdaq Composite Index posted its biggest drop in more than two months, tumbling 1.21% to 14,660.58, as all three of the major American equity indices fell from all-time highs. The Hang Seng Index sank the most since May 2020 as speculation swirled that US funds are offloading China and Hong Kong assets. The S&P 500 Index fell 0.47% to 4,401.46 and the Dow Jones Industrial Average lost 0.24% to 35,058.52.
The rout in China is adding to global market unease, with investors already concerned about the economic recovery, given the rise in the Covid-19 delta variant and central bank talk of tightening policy. While a strong start to the earnings season has helped US equities, investors have been anticipating further catalysts from this week’s Federal Reserve meeting and the updates due today from the top five heaviest-weighted stocks in the S&P 500. Shares of all three were among the biggest drags on the index on Tuesday.
Shares of Amazon.com Inc (AMZN US) and Facebook Inc (FB US), which are set to report earnings later this week, also tumbled. Nine of the 10 stocks in the NYSE FANG+ index, which includes the biggest US-based tech companies as well as China’s Baidu Inc (BIDU US) and Alibaba Group Holding Ltd (BABA US), ended the session lower.
Forecasts indicate that S&P 500 earnings growth should set new highs during the second quarter season, and so far more than 80% of the companies that have reported their results beat Wall Street’s sales and profit estimates. That has helped to offset concern about inflation and the spread of Covid-19. At the same time, it has some investors thinking this might be as good as it is going to get for a while. – Bloomberg News.
Sales of Louis Vuitton handbags and the easing of lockdowns across the world helped revenue soar at fashion houses owned by LVMH (MC FP).
In a bumper quarter for the owner of some of the world’s best-known luxury brands, like-for-like sales rose 84% last quarter, outstripping analysts’ expectations.
LVMH benefited from an easy comparison with 2020, when many stores were shut due to early pandemic lockdowns. Even so, the report will probably prompt earnings upgrades for others in the industry because LVMH is seen as a bellwether, according to a market analyst.
Organic revenue at LVMH’s fashion and leather goods division surged 120% in the second quarter from a year earlier and 40% from the same period in 2019, the company said.
Demand from Chinese consumers “remains as good it’s been for quite some time”, according to Guiony. Asia excluding Japan represented 38% of LVMH’s total revenue in the first half, followed by a quarter for the US.
LVMH announced last week (ended 23 July) a 60% stake purchase in Off-White, the streetwear brand created by Virgil Abloh, who is also in charge of menswear design at Louis Vuitton. The luxury conglomerate also said earlier this month it would take a minority investment in the new brand of Phoebe Philo, the former cult designer at Celine. – Bloomberg News.
The Stoxx Europe 600 Index closed 0.54% lower at 458.65.
Japan’s aggressive new plan to champion clean energy is shaking up the liquefied natural gas (LNG) market that it helped pioneer 60 years ago.
The country, the world’s top LNG importer, called for more renewables such as wind and solar to replace natural gas in a revised plan released last week (ended 23 July). The shift aims for LNG-fired power generation to fall by roughly half this decade, creating upheaval for Japanese utilities as well as suppliers from Qatar to Australia to the US.
The stricter guidelines will see Japan imports drop by a third by the end of the decade, according to traders and analysts. It will force domestic utilities to abandon long-term LNG deals, which have been the backbone of the nation’s imports, while increasing dependence on the more turbulent spot market.
The policy was a surprise to suppliers around the world. Natural gas – once widely seen as the bridge to a green future – has been falling out of favour with some governments as they boost efforts to slow climate change and the cost of renewables drops drastically. Until recently, Japan had been touting the super-chilled fuel as a cleaner alternative to coal.
Meanwhile, Japanese firms will think twice before renewing legacy contracts or investing in new export plants. Japan’s oldest LNG agreement with Indonesia, which had been in place for nearly 50 years, fell apart last year due to uncertainty exacerbated by the coronavirus pandemic. – Bloomberg News.
The Nikkei 225 Index dipped 0.93% to 27,710.50 in early Wednesday trading. The benchmark rose 0.49% to 27,970.22 the previous session.
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