Early Morning Call: easyJet shares under pressure following Q3 loss

Indices outlook

Indices in the Asia-Pacific region mostly rose overnight, following modest gains recorded on the Dow Jones and S&P 500. The Nasdaq posted a decline of 0.43%.

In Japan, the minutes of the latest Bank of Japan (BoJ) meeting show that its members agreed the economy still needed massive monetary support to weather the storm from rising commodity prices and supply disruptions. They see wage hikes as key to sustainably achieving their 2% inflation target. For now companies in the country remain reluctant to hike wages due to uncertainty about their business outlook.

South Korea's economy grew 0.7% in the second quarter, which was higher than the 0.4% growth expected by economists.

In the US, investors and traders await updates on the state of the housing markets in the country. S&P/Case-Shiller home price index and house price index will be released at 2pm, followed an hour later by new home sales.

Corporate news

Corporate reports are gathering pace in Europe.

After Ryanair Holdings PLC (LSE) yesterday, it is easyJet PLC's turn to publish it third quarter (Q3) trading statement this morning. It reports a loss before tax of £114 which it attributes to disruption caused by staff shortages.

Unilever PLC raised its full-year guidance after posting better-than expected half year sales. It now expects full-year underlying sales growth at the top of a range of 4.5% to 6.5%.

Swiss Bank, UBS posted a smaller-than-expected rise in net profit for the second quarter. Profit in the three months ended June increased by 5% $2.108 billion, missing expectations $2.4bn. Revenues at its investment bank fell 14%.

In the US, Walmart Inc (All Sessions) slashed its profit forecast. It sees its adjusted earnings per share (eps) for the second quarter declining around 8% to 9%, compared its previous outlook of flat to slightly up. The retailer expects its full-year profit to decline by 11% to 13%, compared to the 1% fall it previously forecast.

In a context of food and energy soaring prices, demand for home goods, appliances and kitchenware is falling, leaving retailers with mountains of inventory. In May, Walmart cut clothing and general merchandise prices to reduce backlog, and will need to continue tio do so, squeezing its margins further. Walmart shares dropped in after-hours trading, taking its rivals Target Corp and Amazon.com Inc (All Sessions) with it.

Today will again be a very busy session in terms of quarterly earnings releases. Coca-Cola Co (All Sessions), UP, General Motors Co (All Sessions) and GE Aerospace (All Sessions) are among the companies set to report before the opening of the stock market.

Microsoft Corp (All Sessions) is scheduled to report its fiscal fourth quarter earnings tonight after the closing bell. The street expects earnings to rise by 6% year-on-year (YoY) to $2.29 per share. Revenue is also forecast to increase, by 13.5% YoY, to $52.43bn. Microsoft realises around 50% of its revenue outside the US, and therefore will be negatively impacted by the strength of the dollar of the past few months.

Alphabet Inc - C (All Sessions) is another one to report tonight after market close. Analysts anticipate earnings of $1.28 per share, down 5% on the same quarter a year ago, but just above last quarter's EPS. Revenue is expected to rise by 13% YoY to just over $70bn.

In a context of growing recession fears, the advertising segment is the one investors will concentrate on as it is will be the first sector to suffer from economic slowdown.

In the first quarter of 2022, 80% of Google's total revenue came from Google advertising. In Q1, advertising revenue rose by 22% YoY, but that pace is expected to slow from the second quarter. By how much in Q2, and what does the group expect for the following quarters? This is what investors want to know.