Stock markets in Europe are in the red after Apple (NASDAQ:AAPL) warned it would not met its revenue forecast on account of the health emergency in China. The update hammered home the point that businesses are being disrupted because of the health crisis. The situation in China is getting worse and many more major global companies are likely to lower their outlooks’ on the back of the emergency. China is important in terms of manufacturing, sales as well as supply chains, so the wider negative impact has the potential to be huge, hence why dealers are bearish on stocks.
HSBC (LON:HSBA) shares are in the red this morning after the bank confirmed that full-year profit fell by 33% to $13.3 billion. The bank revealed aggressive restructuring plans too as it intends to reduce its global headcount by 35,000, which would equate to approximately 15% of the workforce. Many banks have been reorganising their business recently. HSBC plans to greatly reduce their risk-weighted assets, so the trading department is going to be slimmed down. The bank will incur impartment charges of more than $7 billion as a part of the overhaul. The share buyback scheme will be suspended in 2020 and 2021 as a part of the restructuring plan. HSBC’s liquidity position is robust as the CET1 ratio ticked up to 14.7% from 14%, so there are no concerns there, but the firm needs to just focus more on profitable aspects of the business such as private banking.
BHP (LON:BHPB) said the coronavirus crisis had a ‘muted’ impact on the business, but the health emergency will bring about some uncertainties. First-half underlying attributable profit jumped by 39% to $5.10 billion, undershooting the $5.28 billion forecast. Higher iron ore price helped drive up profit at the group. The firm predicts that petroleum production volumes will be at the lower end of the forecast on account of cyclone Damien. The company foresees uncertainty surrounding the health crisis in China, but that is beyond its control, but at least the group kept its unit cost guidance unchanged for major assets.
The political unrest in Hong Kong has hurt Intercontinental Hotels – the region saw revenue per available room (RevPAR) fell by 27% on a yearly basis, and it slumped by 63% in the final quarter. It wasn’t a great year overall as total comparable RevPAR slipped by 0.3%, while mainland China registered a 4.5% fall.
GBP/USD is slightly lower in the wake of the UK jobs data. The unemployment rate held steady at 3.8% meeting forecasts, while average wages excluding bonuses cooled to 3.2% from 3.4%.
EUR/USD dipped slightly after the German ZEW economic sentiment report came in at 8.7, which was a big drop from the 26.7 posted in January.
Walmart (NYSE:WMT) will be in focus today as the company will post its fourth-quarter earnings. The stock price surged in mid-November when the company posted its third-quarter figures, but the bullish sentiment has faded a little since then. In that update, EPS were $1.16, which easily topped the $1.09 forecast. Same-store-sales excluding fuel increased by 3.2%, narrowly exceeding expectations. E-commerce sales surged by 41%, and traders will be wondering if the strong online shopping trend is set to continue.
Apple (NASDAQ:AAPL) will also be in focus after the company cautioned the disruption on account of the coronavirus in China will cause the company to miss its quarterly revenue target. The tech giant hoped that businesses in China would return to normal after the Lunar New Year holiday, but it has taken longer than expected to return to normal operations. China is crucial for manufacturing so the ripple out effect across the sector is likely to be costly. Store closures in China have been an issue for Apple too, so it has been a double whammy for the group.
We are expecting the Dow Jones to open 133 points lower at 29,265 and we are calling the S&P 500 down 13 points at 3,367.
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