Investing.com — The disappointing guidance from Texas Instrument and Microsoft, as well as a rare miss from Alphabet, are casting a long shadow over Meta Platforms, which reports shortly after the close. Europe’s banks are doing much better than expected. This is because they are likely to be subject to windfall taxes as governments scramble for money amid the economic slowdown. It will take the U.K. a few more weeks to fill in the budget gaps. Here’s what to expect in financial markets on Wednesday 26th October.
1. Alphabet, Microsoft reports dent sentiment
Disappointing updates from tech giants and Alphabet (NASDAQ:) late on Tuesday are taking some of the steam out of the week’s rally in stocks in the overnight session.
Microsoft (NASDAQ) warned of a slowdown in growth at Azure Cloud hosting, while Alphabet reported sales growth only 6%, rather than the expected 9%. YouTube’s revenue fell 2% year-over-year, while revenue for the core Google search brand saw a 4.2% increase.
These numbers confirm the gloom caused by digital companies that are financially weaker and also depend on advertising such as Snap (NYSE) and place the spotlight on Meta Platforms (NASDAQ), Facebook’s owner, when it reports this evening.
2. Rates revival is good for European banks
European banks continued to report a broad rise in earnings, reflecting the European Central Bank’s belated move to raise interest rates during the summer.
Deutsche Bank (ETR) posted its highest performance in over a decade and also made money from volatility in the bond markets. Italy-based Unicredit, (BIT:), also posted, while Santander, (BME:), raised net by 11% over the year.
All three sets of figures were – like (LON:) on Tuesday – ahead of forecasts and raise the likelihood of governments levying windfall taxes to fill the gaps in their budgets created by the energy crisis and the accompanying economic slowdown. Barclays (LON 🙂 Nevertheless, market volatility impacted its U.S.-focused Investment Bank.
3. Stocks set to open at a lower level; Musk closes on finalizing deal
U.S. stock markets are set to open lower thanks to the Microsoft and Alphabet reports, evidence that the slowdown is reaching even those megacaps that were long thought to be immune to the rest of the market’s problems.
Texas Instruments (NASDAQ) added to the gloom Tuesday evening by saying that it was witnessing demand weakness shift from the consumer electronics segment towards the wider industrial market. Chipotle (NYSE) warned that it is losing its traffic as customers become less wealthy.
At 06:25 ET (10.25 GMT), the points were down 41, or 0.1%, while they were down 0.7% and down 1.6%, respectively.
The aerospace and defense giants Boeing and General Dynamics (NYSE) are leading the early earnings slate, along with Thermo Fisher and ADP (NASDAQ), Bristol-Myers Squibb and Kraft Heinz (NASDAQ), and Norfolk Southern (NYSE:). After the bell, Ford (NYSE:), reports with Meta. Overnight, there were warnings of weak business ahead from brewing giant (AS:) and (ETR:), while Europe’s largest gas buyer (ETR:) upheld its forecasts.
4. UK needs more time for budget gap plugging
Rishi Sunak is not in a hurry to add to the Gilt drama. The new U.K. Prime Minister has delayed announcing his fiscal plans by just over two weeks to November 17, giving himself more time to fill a funding gap that’s expected to be between 30 billion and 40 billion pounds a year due.
Sunak, who already demonstrated his commitment towards balancing the books via higher taxes, will now need to find spending reductions, at least inflation-adjusted, to achieve the goal of a budget showing debt falling as part of GDP over medium term.
Gilts have rallied strongly since Sunak replacing Liz Truss’s fate became likely. The yield rose 7 basis points, to 3.70%. The dollar rose 0.8% to $1.1564, the highest level since mid-September.
5. Oil drifts after API inventory build; U.S. data eyed
Crude oil prices drifted after Tuesday’s weak economic data from the U.S. were corroborated by a chunky 4.5 million barrel rise in crude inventories, according to the . They are due at 10:30 ET and will show an increase of 1 million barrels.
Wednesday’s economic data appear unlikely to improve risk appetite, with expected to fall further and likely to confirm a pattern of slowing final demand.
At 06:40 ET futures were 0.5% higher at $85.70/barrel, while they were 0.2% higher at $91.88/barrel