Jack Nicholson should be starring on Wall Street right now- because as far as earnings, there’s a feeling that this is ‘As Good As it Gets’. Company earning continue to beat top and bottom line estimates but investors are not impressed. Top that off with 3% treasury yields competing for their money and stocks look unattractive.
After jumping as much as 13% in pre-market trading in response to beating first quarter earnings, shares of Twitter turned negative when US markets opened. Even Twitter (NYSE:TWTR) mustering 3% monthly active-user growth, which bulls have been clamouring for was not enough. Shares of Facebook (NASDAQ:FB) are also looking soft ahead of its earnings after the bell. Investors know this quarter will be another belter but 2-3 quarters from now as users and advertisers react to more restrictive privacy policies and it could be a different story.
We think it might take Apple (NASDAQ:AAPL) to report its first quarter earnings to clear the air. Weak results from a few Apple suppliers that implies weaker iPhone orders has rippled through the tech sector. Investors are taking falling smartphone demand as a proxy for overall consumer interest in technology.
The FTSE 100 was down 1% by late afternoon in the City. A flurry of mega M&A deals have not been enough to offset the weak sentiment across global markets.
SKY (LON:SKYB) was the standout gainer on the index after Comcast (NASDAQ:CMCSA) outbid Rupert Murdoch’s Twenty-First Century Fox (NASDAQ:FOX) for the company. A bidding war had not been fully priced in, especially with Comcast coming out of the gates with a ‘Sky-high’ 16% premium over the offer from Fox. Comcast have a good chance of coming out on top because it would be a lot simpler for all involved if Disney (NYSE:DIS) could buy Fox without Sky. Media plurality is the main stumbling block for Murdoch’s approach and in part why the Sky board has withdrawn its recommendation. Regulators should in theory happily wave the merger though if Comcast make the right noises on the independence of Sky News.
We were caught napping by Shire’s board recommending the fifth offer from Japan’s Takeda (T:4502) pharmaceutical. Takeda’s persistence has not paid off for its shareholders who saw the share price tank on the belief the firm has overpaid. Shire (LON:SHP) seem to have put plans to pursue the organic growth of its fast-growing rare diseases business aside. It’s a reminder that everyone has a price.
The US dollar continued to gain traction as US treasury yields hovered at 3%. The ECB and BOJ make monetary policy decisions on Thursday and Friday this week respectively. Any commentary from Presidents Draghi and Kuroda on when the central banks will end policy stimulus could have a big impact on the monster rally happening in the dollar and the yield on US 10-Year treasury bonds, which just hit a four-year high of 3%.