Early Morning Call: watching EUR/USD ahead of Fed rate decision
Banks dominate the earnings scene across European markets as CS misses and DBK warns. LLOY, GSK, RIO, BATS, MC, CSGN, ADS, BA, F and META also reporting. In FX markets it's all about the US rate decision today.
Indices outlook
Indices in the Asia-Pacific region were mixed overnight after a negative session in the US, where once again technology stocks led losses. Likewise, Hong Kong’s tech stocks weighed on the Hang Seng.
In Australia, trimmed mean consumer price index (CPI), the inflation reading favoured by the Reserve Bank of Australia (RBA), rose by 4.9% in the second quarter (Q2), after an increase of 3.7% the previous quarter, and higher than the 4.7% expected.
FX markets
Currency markets are muted ahead of the the Federal Open Market Committee (FOMC) decision tonight.
US rates are poised to take another dramatic step today, with a second straight 75-basis point (bps) hike on the cards. But the Fed's strategy beyond that point is less certain as it weighs a fresh rise in consumer price growth against mounting recession risks.
Earnings update
Ahead of the Fed decision, investors and traders will have to digest another wave of earnings.
In the UK, Lloyds Banking Group PLC reported a fall in first-half profits. Rising borrowing costs and consumer goods prices forced the lender to set aside more cash.
GlaxoSmithKline PLC has raised its full-year (FY) outlook after recording a 19% increase in sales. British American Tobacco PLC (LSE) reported a drop of 25% in its first-half profit, due to a charge worth £957 million on the transfer of its Russian business. Also look out for reports from Rio Tinto PLC, Fresnillo PLC and Reckitt Benckiser Group PLC.
Elsewhere in Europe, look out for Adidas AG at the open. The sporting goods maker has cut its 2022 earnings forecast. The company released an unscheduled statement yesterday evening in which is said, "given the continued widespread Covid-19-related restrictions, Adidas now expects revenues in Greater China to decline at a double-digit rate during the remainder of the year."
LVMH Moet Hennessy Louis Vuitton SA posted higher-than-expected revenue for the second quarter, up 19%. The French luxury group benefited from a tourist boom in Europe and resilient US sales, offsetting a drop in its Chinese operations.
Also reporting this morning, Deutsche Bank AG. The German lender has lowered its full-year investment bank revenue forecast. Credit Suisse Group AG (CH) meanwhile posted a larger-than-expected quarterly loss and announced the departure of its CEO.
In the US, Microsoft Corp (All Sessions) rose in extended trading yesterday evening after saying it forecast double-digit growth this fiscal year. Despite the positive forecast, Microsoft's Q4 results missed expectations. The group posted earnings of $2.23 per share, six cents lower that what economists has anticipated. Revenue rose by 12% to $51.87 billion, driven by its cloud computing division but came short of estimates of $52.43bn, impacted bya decline in PC shipments during the last quarter.
Alphabet Inc - C (All Sessions) also rose in after-hours trading, despite earnings and revenue missing estimates. Investors reacted positively to the news that sales at Google Search, the group’s biggest money maker, beat expectations.
Today, watch out for quarterly reports from Boeing Co (All Sessions) and The Kraft Heinz Company before market opens. Meta Platforms Inc (All Sessions) and Ford Motor Co (All Sessions) are set to report earnings after the closing bell.
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