Earnings From Apple, BP take centre stage
The selloff of big tech stocks and more specifically the FAANG’s continued overnight. Facebook (NASDAQ:FB) Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) came under pressure as investors look nervously towards Apple’s earnings which will be released after the closing bell later today.
The Nasdaq closed down 1.4% overnight as the selloff spread across the broader tech sector. The NYSE FAANG + Index entered correction territory on Monday down over 10% since its recent intraday high, on June 21.
Can Apple Reverse The Tech Selloff?
How things progress from here, will rest on Apple’s results. A miss in earnings from Apple (NASDAQ:AAPL) will deepen the current tech sector selloff, but at what level will investors start to consider these shares cheap? This will depend largely on how investors perceive future growth for these companies, something which they are reassessing after disappointing outlook and user growth figures. A surprise to the upside from Apple could stop this sell off in its tracks; however it might only provide a short-term distraction.
Apple is expected to post earnings of $2.18 a share on sales of $52.34 billion for its fiscal third quarter. This would equate to a 31% year on year growth in earnings per share and 15% growth in sales. In addition to the top and bottom line, investors will also look at iPhone sales, average price and revenue from services. 41.8 million iPhones are forecast to have been sold in the June quarter against 41 million a year earlier.
US PCE to Boost the Dollar?
The selloff in the US stock market weighed on the dollar, which sold off across the board despite strong pending home sales. Dollar traders will now look to PCE inflation data, which is expected to show that inflation remained constant in June at 2%, in line with the Fed’s target after hitting it for the first time since 2012 in May.
Despite the Fed saying more recently that they would not be encouraged to quicken the path of interest rate rises, should PCE go slightly over 2%; a surprise to the upside in PCE could still boost the dollar, after a hard sell off in the previous session.
Caution As Activity Starts to Pick Up
After a slow start to the week in Europe, activity starts to pick up on Tuesday. The UK economic calendar remains fairly sparse until Thursday’s BoE rate decision. In the meantime, there are several heavyweight companies reporting such as BP and UK banks later in the week.
Blowout Profits Expected at BP
BP (LON:BP) will be under the spotlight, as it releases its earnings report prior to the open today. BP is expected to report profits of $2.7 billion in its Q2, its best performance in 4 years.
Given the strong rally in the price of oil, which has surged from just below $50 per barrel a year ago to $75 currently, the bar is high and weak earnings would be more than surprising. In addition to the top and bottom line, we know from Shell’s performance last week, that cash flow will also be a key metric.
Furthermore, following the purchase of BHP's (LON:BLT) shale assets for $10.5 billion last week, BP's debt levels continueto be a concern, with doubts increasing over whether BP would be able to weather another downturn in the price of oil.
Opening calls
FTSE to open 11 points lower at 7689
DAX to open 2 points lower at 12796
CAC to open 9 points lower at 5480