Early Morning Call: watching Next shares on FTSE 100 amid better-than-expected profits

Indices overview

US stocks ended Tuesday’s session lower, led by a nearly 0.45% decline in the Nasdaq as higher Treasury yields hit technology-related shares.

Overnight, indices recorded gains. Hong Kong’s Hang Seng led gains, boosted by Alibaba’s performance. Alibaba shares soared as much at 16% after the company announced a major restructuring plan. Alibaba will re-organise into a holding company structure with six sub-divisions, each with their own CEOs and boards.

In Germany, Gfk consumer confidence rose to -29.5 in April, after 30.6 in March, a sixth straight month of improvement for an indicator that fell to an all-time low in October last year. Watch out for France's consumer confidence at 07.45.

In the US, at 3pm, the market awaits pending home sales for February, expected to fall by 2.3%. This would follow an unexpected rise 8.1% in January month-on-month (MoM), the biggest hike in two and a half years.

Corporate news

On the corporate front, Next reported a better-than-expected 5.7% rise in annual profit. Pretax profit rose to £870.4 million, higher than the £860mn anticipated. For 2023-24, the British clothes retailer kept its guidance for a 1.5% decline in full-price sales and profit of £795 million.

Micron shares were very volatile after the group published its second quarter (Q2) earnings and forecast for the current quarter. The chipmaker posted a loss of $1.91 per share, much wider that the 66 cents loss anticipated by the market. Revenue also fell short of expectations at $3.69 billion, down about 53% on the same quarter a year ago.

Micron expects a loss of $1.58 per share for the current year and a revenue of $3.70 billion plus or minus $200 million, a drop a about 60% which would be the deepest revenue drop in more than two decades. Still, this forecast matches Wall Street expectations.

Micron's President and CEO, Sanjay Mehrotra, told analysts he was confident about the long-term. He expects the memory chip industry to hit a record in terms of market size in 2025, helped by the expansion of AI, which is boosting demand for data centres. A typical AI server has up to eight times the amount of DRAM a normal server has, and three times the amount of NAND.

Commodities

Oil prices continued to climb on Wednesday, rising for a third straight session after the latest API data showed big declines in stocks. This data adds to the recent news that lifted the prices by nearly $5 since the start of this week: first, there was the acquisition of most of Silicon Valley Bank by First Citizens Bank that triggered a wave of optimism across asset classes including oil prices. Then there was a survey saying China's crude oil imports are also expected to rise 6.2% in 2023.

Also, a dispute involving Kurdish authorities halted around 400,000 barrels a day of oil exports from a port in Turkey. Concerns are growing among analysts, some considering the loss of Northern Iraq oil as "underestimated". Barclays told Reuters that any protracted outage of Kurdish exports until the end of the year would imply a $3 a barrel upside to the bank's $92 a barrel Brent price forecast for 2023.

Sugar prices also continue to rally in New York and London. On Monday, a senior State Government official told Reuters that Maharashtra, the top sugar-producing state in India, could produce nearly 16% less sugar than previously estimated. There is limited availability of sugar cane in the region, due to unfavourable weather, forcing mills to close.

South China experienced similar weather conditions over the past two weeks: extreme rainfall and temperatures above normal prompted a decline in sugar yield in the region.