Hong Kong stocks rise after China support promise

Chinese stocks

On Monday, China leaders pledged to step up policy support. On Tuesday, Chinese stocks are rising. Beijing said it will step up economic policy support to focus on expanding domestic demand, boosting confidence and preventing risks. Property policies are to be adjusted and optimised in a timely manner, in response to what the authorities call "significant changes" in the property market supply and demand.

Adidas

On Monday evening, Adidas gave us a taster of what Q2 earnings will look like. Adidas announced an operating profit for the second quarter of €176MIn, down from €392MIn a year earlier. Group revenue in the second quarter fell 5% to €5.3BIn, but gross margin rose 0.6 percentage points to 50.9%.

The forecast could please investors. Adidas now expecting a full-year operating loss of €450MIn, down from a previously estimated €700MIn loss, thanks to unexpectedly strong sales of Yeezy shoes left over from abandoned collaboration with rapper Kanye West. Full second-quarter results are expected on August 3.

Alphabet

Two tech giants are due to report tonight after the closing bell. One of them is Alphabet. The Google parent company is forecast to post earnings of $1.34 per share, on revenue of $72.82BIn. Investors will be attentive to any Al-related announcements. They would like to know how the group can drive incremental monetisation through generative Al search.

Ad revenue will be key. Google ad revenue is expected to reach $57.45BIn, while Youtube ad revenue is seen at $7.41BIn by analysts. Cloud growth is another point of interest. In the previous quarter, Google Cloud turned profitable for the first time. Revenue in this division is forecast at $7.83BIn.

Microsoft

The other tech giant due to report is Microsoft. Earnings are expected to rise by 14.3% YoY to $2.55 per share. Revenue should reach $55.44BIn, up 7% on the same quarter a year ago. If the launch of ChatGPT earlier in March gave a boost to the stock, it still followed a trend line that began earlier. Since the start of 2023, Microsoft shares have gained about 43%. For now, Microsoft's fate remains bound to its cloud service Azure.

Visa

Other earnings expected today include Visa. Earning per share (EPS) is seen at $2.11 on revenue of just over $8Bin. Visa has beaten estimate for the past 12 quarters. General Motors is forecast to post earnings of $1.84 per share on revenue of $41.92BIn. Earlier his month the automaker said that US deliveries rose 18.8% to just under 700,000 vehicles, its best performance since Q4 2020. Verizon's EPS is expected at $1.17, down 10.7% year-over-year (YoY), and are unlikely to give a boost to share price, down some 30% over the past 12 months.

Oil outlook

Investors are concerned that Verizon's generous dividend could shrink. Oil prices rise for a third straight day. Hopes for tighter supplies helped WTI and Brent to hit a new three-month high. The market is growing confident that global central bank tightening will soon come to an end, and therefore provide support for global growth.

Oil analysts also hope China leaders' pledge to shore up the country's economy will give a boost to demand. The destruction by Russia of Ukrainian grain warehouses on the Danube River sent Wheat price in Chicago nearly 10% higher. Commodity traders now fear that Russian attacks will become a real threat to grain exports and shipping.

Russia & Ukraine

After refusing to renew Black Sea Grain deal last week, Russia has been targeting infrastructures in Odesa port. Since Russia's invasion in February 2022, Ukraine has expanded grain exports overland via the EU to about 1 million tons a month. Any interruption of these alternative routes could quickly hit international grain supplies.