US EARLY MORNING: Solid AAPL earnings not enough to offset AMZN gloom; PCE inflation data ahead

SNAPSHOT: US index futures are trading with losses between 0.6% and 1.5%, with the tech-heavy Nasdaq-100 lagging; Amazon is down over 12% (it has a weighting around 7% in the Nasdaq-100); gains in Apple (weighted at just under 14% of the NDX) and Intel (weighted at around 1%) are not enough to offset the pressure in Amazon. Treasury yields are rising by 2-5bps, with the short-end bearing the brunt of the underperformance. US PCE data is due for release later today (the Q3 GDP report released Thursday provided some signs that PCE inflation may be cooling); that said, while the street looks for US core PCE to rise at a slightly slower rate in September (0.5% M/M expected after the 0.6% in August), the annual rate of core PCE is expected to tick up to 5.2% Y/Y from 4.9%, which may be enough to dash some of the nascent hopes that the Fed will pivot towards a smaller increment of rate hikes next week; currently, the market is expecting 75bps, with only very negligible pricing for a smaller 50bps move. On the inflation front, Germany will release its flash CPI metrics for October later today, and a hot print out of the North Rhine-Westphalia region has put jitters into fixed income markets, while French inflation metrics for October also surprised to the upside. The Dollar Index is firmer by around 0.4%, but this may be buoyed by USDJPY, after the BoJ emphasised that it was not considering a rate hike any time soon, despite the tenor of global central banks moving in a more hawkish direction.

MEGACAP EARNINGS: Apple (AAPL) trades with small gains in the premarket (+0.4%); sales and profits topped expectations, sales of iPhones and iPads were a little below the street's expectations (despite the former posting a record quarter), but Mac had a blowout quarter. Traders have been encouraged by the performance of the megacap, particularly given the disappointment after earnings reports from many of its peers, but analysts are keen to emphasise that AAPL is not representative of the wider trend among US corporates. Indeed, Amazon (AMZN) is over 12% in the red despite quarterly profits coming in above expectations; sales were soft and Q4 revenue guidance -- a proxy for holiday sales -- underwhelmed expectations. Meanwhile, Intel (INTC) has been another highlight, trading with gains of over 5% in the US premarket as profits and sales topped expectations, while its PC-chip sales were a touch better than feared; these factors are clearly offsetting the soft guidance. We recap on the main points below.

DAY AHEAD: Focus will centre around the US PCE inflation data for September and German flash inflation metrics for October. The final University of Michigan data for October are expected to see the main three indices unchanged, but there will be a lot of attention on the inflation expectations measures. Our full day ahead schedule can be accessed here. Today's US earnings docket includes CVX, XOM, NEE, ABBV; full expectations can be accessed here.











28 Oct 2022 - 09:23- Research Sheet- Source: Newsquawk

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