US EARLY MORNING: Tech hit after disappointing updates from MSFT and GOOG; both provide a negative read-through for META earnings later today, analysts say

SNAPSHOT: US equity futures are lower, with the tech-heavy Nasdaq-100 leading the downside after disappointing earnings from Microsoft (MSFT) and Google (GOOG), while the outlook from Texas Instruments (TXN) missed the consensus expectations, and South Korean chipmaker SK Hynix also warned on chip demand. Amid the cautious risk-set up, Treasury yields are lower by 3-8bps, with much of the rally concentrated in the long-end. The Dollar Index is lower, perhaps has pricing for the Fed trajectory of rate hikes narrows a touch (heading into this week, money markets were pricing terminal above 5%, but that has fallen to around 4.89%); the AUD may also be contributing to the buck’s downside, after hotter than expected inflation data overnight saw traders begin pricing in a more hawkish course for the RBA. The GBP’s recovery also continues as new PM Sunak gets started; the focus now is whether the fiscal update, originally planned for Monday, still takes place (there are some reports suggesting it could be delayed). In China, the currency’s gains are said to have been supported by state bank buying. Meanwhile, crude futures are off by 40-60c after API data reportedly showed a larger than expected build in weekly crude stocks; products were mixed, with gasoline posting a larger than expected draw, although distillate stockpiles saw a surprise build.

BIG TECH HIT: Although index futures have come off lows, the tech-heavy Nasdaq-100 is still around 2% in the red, dragged lower by disappointing earnings updates from Alphabet (GOOG) and Microsoft (MSFT). The former topped top- and bottom-line estimates, although advertising revenues disappointed, exacerbating recent concerns around ad names, while execs are expecting larger headwinds from FX ahead. Microsoft, meanwhile, posted weak cloud revenues and noted both the slowdown in PC segments as well as in ads. Analysts have been cutting price targets of both names in wake of the earnings report. RBC said that while the near-term could prove challenging for MSFT, the challenges that it faces are likely not unique to it. On GOOG, RBC has lowered its price targets to below the street due to greater FX impact and slightly slower ad growth, only partially offset by higher Cloud estimates. The bank also says that there is an 'obviously negative' read through for Meta Platforms (META) earnings, which are due to be published after the closing bell today. Meanwhile, the world's second-largest memory chipmaker SK Hynix (HXSCL) warned of an "unprecedented deterioration" in memory chip demand, as well as deepening fears of global recession; an exec said it was hoping that the market will stabilise to some extent by H2 2023, but does not rule out the possibility of a longer downturn.

DAY AHEAD: It’s another busy day for earnings, with focus on TMO, ADP, BMY, GD, BA, META, F, NOW in the US (earnings expectations can be accessed here). Data-wise, the docket is a little thinner today, but there will be attention on US MBA mortgage applications data, given other housing metrics are now beginning to show some of the challenges within the sector (yesterday’s Case-Shiller and FHFA are the latest examples); New home sales data for September will also be eyed. US advanced goods trade balance are also due for release. On the central banks front, the BoC is expected to lift rates by 75bps later today (our preview can be accessed here); traders will also begin shifting focus to Thursday’s ECB meeting (our preview is here). Elsewhere, energy inventory data from the DoE will be released in the European afternoon. Our full Day Ahead schedule can be accessed here.

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26 Oct 2022 - 09:15- Data- Source: Newswires

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