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Microsoft, Alphabet, Chinese sovereign debt, Deutsche Bank - what's moving markets

Published 25/10/2023, 09:50
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Investing.com -- Results from Microsoft and Alphabet (NASDAQ:GOOGL) receive differing reactions as quarterly earnings season continues with Meta Platforms and IBM due. Beijing has decided to issue a substantial amount of sovereign debt to support the struggling Chinese economy, while results from Deutsche Bank come in ahead of expectations.

1. Microsoft outshines Alphabet; Meta Platforms due next

Microsoft (NASDAQ:MSFT) took the honors at the start of the reporting quarter for the tech giants, the companies that have accounted for the bulk of the S&P 500's 10% year-to-date gain.

The software giant beat expectations, after the close Tuesday, with its fiscal first-quarter results, as its investment in artificial intelligence bolstered growth in its cloud business Azure.

Microsoft has emerged as an AI frontrunner, largely due to its substantial investment into startup OpenAI, the maker of the popular generative AI chatbot ChatGPT.

Alphabet (NASDAQ:GOOG), by contrast, disappointed, as the Google-parent's cloud business crawled to its slowest growth in at least 11 quarters.

Companies have curbed spending on cloud-related services, including expensive AI tools, slowing revenue growth at Google's cloud unit to 22.5% in the third quarter, from 28% in the prior three-month period.

Microsoft’s stock rose almost 4% premarket, while Alphabet's stock fell almost 6%.

The tech deluge continues Wednesday, with numbers due from Meta Platforms (NASDAQ:META) later in the day. 

The Facebook and Instagram parent is expected to report earnings per share of $3.64 on revenue of $33.6 billion, and analysts will be listening for updates on its efficiency efforts and advertising business.

2. Futures largely lower as earnings season continues

U.S. stock futures edged largely lower Wednesday, as investors digested quarterly results from tech giants Microsoft and Alphabet, with more influential companies still to report earnings.

At 04:45 ET (08:45 GMT), the Dow futures contract climbed 30 points or 0.1%, while S&P 500 futures fell by 14 points or 0.3% and Nasdaq 100 futures dropped by 75 points or 0.5%.

The major indices closed higher Tuesday, as U.S. Treasury yields eased off their Monday highs, helping to reduce the pressure on the tech sector, in particular. 

The tech-heavy Nasdaq Composite rose 0.9%, while the broad-based S&P 500 gained 0.7% and the blue chip Dow Jones Industrial Average 0.6%. 

Investors will be able to study the earnings from tech giants Microsoft and Alphabet [see above] ahead of more results from the sector from Meta Platforms and IBM (NYSE:IBM) later in the day.

Boeing (NYSE:BA) will also be in focus, and the airplane maker is expected to report a loss per share of $3.23 on revenue of $18.1 billion, with analysts listening for updates on production and delivery.

The economic data slate is largely empty Wednesday, with only September’s building permits and new home sales numbers due, providing insight into the country’s housing market.

3. China to issue sovereign debt to support economy

China announced plans, late Tuesday, to boost its economy by issuing one trillion yuan ($137 billion) of sovereign bonds, designed to support the rebuilding of disaster-hit areas in the country and improve the general infrastructure.

"After the treasury bond funds are put into use, it will help drive domestic demand and further consolidate the recovery of the economy," China's vice finance minister Zhu Zhongming said on Wednesday at a news conference.

The country's 2023 budget deficit will rise to around 3.8% of gross domestic product from a previously set 3%, Xinhua said.

The second-largest economy in the world grew faster than expected in the third quarter, but the drag from the country’s highly-indebted property sector may hit the chances that Beijing can meet its growth target of around 5% for 2023. 

4. Deutsche Bank confirms current banking trends

The latest results from Deutsche Bank (ETR:DBKGn) underscored current trends in global banking, with the German banking giant posting a 8% drop in third-quarter profit, as revenue at the investment bank slumped but grew in the retail and corporate divisions on the back of higher interest rates.

Although earnings dropped, net profit came in more than €1 billion (€1 = $1.0585), better than expected, marking the 13th consecutive profitable quarter after years of hefty losses.

Deutsche Bank’s stock rose over 6% in Frankfurt trading.

"These results demonstrate strong and sustained business growth momentum combined with continued cost discipline," Deutsche Bank CEO Christian Sewing said.

However, with the investment bank facing uncertain business prospects and the increasingly important retail division potentially hit as the country heads towards recession, upcoming quarters could prove less successful. 

5. Crude just off two-week lows

Crude prices edged higher Wednesday, climbing off a two-week low as concerns about slowing European demand competed with worries of Middle East supply disruptions for attention.

By 04:45 ET, the U.S. crude futures traded 0.1% higher at $83.86 a barrel, while the Brent contract climbed 0.3% to $88.30 a barrel.

The benchmarks fell about 2% in the previous session following the release of weak business activity data from the eurozone, suggesting this important oil-consuming region is heading towards recession, which could in turn hit demand for crude. 

The prospect of a deescalation in the Israel-Hamas war also stymied bets that the conflict will disrupt Middle Eastern oil supply, as multiple reports suggested that Israel had delayed a planned ground assault on Gaza. 

This largely overshadowed positive economic news from the U.S., as well as data from the American Petroleum Institute industry body showing that U.S. inventories shrank more than 2 million barrels last week, with fuel demand remaining strong even after the end of the summer season.

The official data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due later in the session.

 

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