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Apple shares spike after strong Q2 print

 

Friday, July 29, 2022, 8.45am GMT

The news shaping the markets today

Ukraine has started counteroffensive attempts to regain control of the southern city of Kherson from the Russian military. The ongoing war sent WTI crude oil prices higher this morning.


Singapore’s unemployment rate fell to 2.1% in the second quarter, from 2.2% in the prior quarter. The country is recording the lowest jobless rate since Q3 2018 lent support to the SGD/USD forex pair.


Vietnam recorded a trade surplus of $0.02 billion in July, versus a year-ago deficit of $1.25 billion. This being the second straight month of trade surplus sent the VND/USD pair higher in forex trading this morning.


Japan’s industrial production grew 8.9% in June, following a 7.5% decline in the previous month. The latest reading also exceeded market expectations of 3.7% growth, lending support to the JPY/USD forex pair.


Australia’s final demand producer price index rose by 1.4% in the second quarter, compared to a 1.6% growth in the previous quarter. The news sent the AUD/USD pair higher in forex trading this morning.

 

What’s happening: Shares of Apple gained in after-hours trading on Thursday, following the company’s release of strong results for its fiscal third quarter.

What happened: The Cupertino, California-based company managed to report strong results despite facing macro challenges.

Although Apple reported a sequential decline in sales for all its product categories, the performance of one of its major products was better than expected.

How were the results: The iPhone maker reported growth in sales from a year ago, but the top-line declined sequentially.

  • Revenue grew 2% year-over-year to $83 billion but represented a decline of around 14.7% from the previous quarter. The figure was slightly higher than Street expectations of $82.6 billion.
  • Earnings declined to $1.20 per share, from $1.30 in the year-ago period. The figure also represented a sequential decline of around 21% but came in higher than the consensus estimate of $1.16 per share.

Why it matters: Several regions in China remained under pandemic-related restrictions through most of April due to the country’s strict zero-covid policy. Many suppliers of components for Apple’s products have their manufacturing units in China, which impacted production during the quarter.

Consequently, a shortage of parts impacted Mac and iPad sales, which cost the company close to $4 billion in lost sales in the quarter. Despite this, Apple generated operating cash flows of $28 billion.

Apple reported revenue growth year-over-year from iPhones and Services, while sales for Mac, iPad and Wearables and Home & Accessories declined.

Apple’s iPhone revenues came in at $40.67 billion, up around 3% from a year ago and also topping analyst estimates of $39.2 billion. Sales of iPads and Macs came in at $7.2 billion and $7.4 billion, versus market expectations of $6.9 billion and $8.7 billion, respectively.

Growth in Apple’s Services business was 12%, contributing $19.6 billion in revenues for the latest quarter, compared to market views of $19.7 billion.

Apple’s sales in the Americas and Europe rose 5% year-over-year, while sales from the Asia-Pacific region recorded high double-digit growth. Sales in Greater China saw a modest decline, with Japan reporting a 16% drop in sales.

Apple returned $28 billion to its shareholders during the quarter, including a dividend of 23 cents per share.

Management did not issue a revenue forecast for the year, citing uncertain economic conditions. However, they said that sales in the ongoing quarter should grow at a faster rate than the 2% year-over-year growth in the fiscal third quarter.

How shares responded: Apple’s shares gained 3% to $162.02 in after-hours trading, following the release of quarterly results. The stock had added 0.4% during the regular trading session. The company’s shares have lost around 11.5% year to date.

What to watch: Investors will continue monitoring supply chain issues and the impact on the availability of components. Markets will also keep an eye on the strength of the US dollar, which has impacted the results of firms generating foreign revenues.

The markets today

European stocks will be in focus today ahead of a couple of major economic reports from the common bloc

Context: Markets in Europe closed mostly higher on Thursday, as investors digested earnings results from large companies and the US Federal Reserve’s interest rate decision.

Details: Investors in European equities got a chance to react to the Fed’s policy decision on Thursday, as the US central bank announced its rate hike after the European markets closed on Wednesday.

The Fed raised its interest rates by 75 basis points, as was widely expected. Although Fed chief Jerome Powell reiterated his hawkish tone on reducing inflation, he also suggested a slowdown in the pace of rate hikes going ahead.

Several European companies, including Barclays, Shell, TotalEnergies, Prada, Diageo, and BT, released earnings reports on Thursday. Shares of Shell rose after the oil giant reported record quarterly profits amid surging oil and gas prices.

The pan-European Stoxx 600 gained 1.09% to close at 432.77 on Thursday, with most sectors closing in the positive zone. Shares of financial services were among the top performers, gaining close to 3% in the session.

France’s producer prices increased 1.3% in June, after declining 0.3% in May. France’s CAC 40 rose 1.3% to settle at 6,339.21, while Germany’s DAX 40 added 0.88%.

UK’s car production climbed 5.6% from a year earlier to 72,946 units in June. However, the FTSE 100 slipped 0.04% to close at 7,345.25 on Thursday.

What to watch: Investors await the release of data on GDP and inflation rate from the Eurozone today. The Eurozone economy, which grew 5.4% year-over-year in the first three months of the year, is expected to expand by 3.4% in the second quarter. The bloc’s annual inflation rate is projected to remain unchanged from the previous month at 8.6% in July.

Other Markets: US indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.03%, 1.21% and 0.92%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY – 134.22 and 134.38 Positive
USD/CAD – 1.2808 and 1.2815 Positive
Gold – 1751.90 and 1752.35 Positive
WTI Crude Oil – 96.88 and 97.12 Negative
Nasdaq 100 – 12695.03 and 12730.23 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0204, 0.06%) Dow ($32,513, 0.07%) Brent ($101.92, 0.1%)
GBP/USD (1.2176, -0.02%) S&P500 ($4,099, 0.61%) WTI ($96.77, 0.4%)
USD/JPY (133.51, -0.55%) Nasdaq ($12,898, 1.26%) Gold ($1,757, 0.4%)

What else to watch today

France’s GDP growth rate, household consumption and inflation rate, Germany’s import prices, unemployment rate, unemployment change and gross domestic product, South Africa’s money supply M3, private sector credit and balance of trade, Spain’s Gross domestic product, current account balance and consumer prices, Turkey’s Balance of trade, tourism revenues and tourist arrivals, UK’s Mortgage lending, consumer credit, number of mortgage approvals and net lending to individuals, Italy’s inflation rate and industrial producer inflation, India’s central government budget value, foreign exchange reserves, value of loans, value of deposits, infrastructure output and money supply M3, Mexico’s GDP growth rate and government budget value, Brazil’s unemployment rate, Canada’s GDP, CFIB’s business barometer long-term optimism index and government budget value, US personal spending, personal income, employment cost index, personal consumption expenditure price index, Chicago PMI, University of Michigan consumer sentiment and Baker Hughes total rigs, Russia’s money supply M2, as well as China’s foreign direct investment.

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