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LGT Navigator: Quarterly reporting season does not yet provide a clear direction

January 25, 2023

The quarterly reports of some stock market heavyweights and a brief trading interruption for reasons that have not yet been clarified took centre stage on Wall Street yesterday. Software giant Microsoft earned significantly less in the final quarter of 2022, citing the negative effects of high inflation and recession worries. Latest purchasing managers' surveys showed a gloomier picture in the US and the UK, while the outlook for the euro area seems to be improving moderately.

Quarterly reporting season does not yet provide a clear direction

The Dow Jones Industrial closed 0.31% higher than the previous day at 33,733.96 points. The S&P 500 broad market index was virtually unchanged at 4,016.95 points (+0.07%) and on the Nasdaq the indices lost around 0.2% on Tuesday. The focus was mainly on the ongoing "earnings season". Microsoft struggled at the end of last year, suffering from high inflation and recession worries. In the three months to the end of December, net profit fell 12% year-on-year to USD 16.4 billion, while sales rose 2% to USD 52.7 billion, the weakest growth in more than six years. Overall, however, the quarterly figures were in line with expectations. The US pharmaceutical company Johnson & Johnson slightly missed the market's sales expectations with its Q4 result but was able to compensate for this thanks to a higher margin. In the bond market, the yield on the benchmark ten-year US Treasury bond was unchanged from the previous day at 3.46%.

Stocks in the Asia-Pacific region traded mixed on Wednesday, mirroring the directional struggles on Wall Street. Stock exchanges remained closed in China, Hong Kong or Singapore for the Chinese New Year holiday. In Tokyo, the Nikkei 225 gained about 0.3%.

Sentiment in the US private sector remains gloomy at the beginning of the year

S&P Global's Purchasing Managers' Index (PMI) for the private sector (services and industry combined) in the US points to a continued weaker economic trend. Although the PMI improved to 46.6 points in January from 45.0 points in the previous month, it remains below the growth threshold of 50. S&P Global Market Intelligence Chief Economist Chris Williamson commented, "The US economy has entered 2023 on a disappointingly weak note as business activity fell sharply again in January."

The outlook for the eurozone, on the other hand, appears to be brightening

In the eurozone, sentiment among companies surveyed by S&P Global improved again at the start of the year. For the first time in about six months, the Purchasing Managers' Index signalled economic growth at 50.2 points (after 49.3 in December).

British private sector sinks further into contraction

In contrast to the euro area, sentiment in the UK deteriorated surprisingly sharply in January. The Purchasing Managers' Index fell from 49.0 to 47.8 points, its lowest level in two years. Analysts had expected a decline to 48.8. According to S&P Global, the weaker-than-expected PMI underscores the potential for recession.

Economic Indicators January 25

CET Country Indicator Last period
08:00 UK Producer Prices (December, y/y) +14.8%
10:00 GE Ifo Business Climate (January) 88.6
16:00 CAN Bank of Canada interest rate decision 4.25%

Earnings Calender January 25

Country Company Period
SZ Givaudan Q4
FR Alstom Q3 Sales
US Tesla Q4
US Abbott Laboratories Q4


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