The news shaping the markets today

Russia’s defence ministry indicated that the military planes from both Russia and China had conducted a joint patrol over the Asia-Pacific region. Continued geopolitical concerns sent the US dollar index slightly higher this morning.

New Zealand’s central bank raised its official cash rate by 50 bps to 2% at its latest meeting, sending the NZD/USD pair higher in forex trading this morning.

Australia’s construction output declined by 0.9% in the three months to March, following 0.6% growth in the previous quarter. Although this missed the consensus estimate of a 1% gain, the AUD/USD forex pair remained elevated after the news.

Singapore’s current account surplus widened to S$28.86 billion in the first quarter, from S$17.65 billion in the year-ago period. However, the SGD/USD pair remained flat in forex trading this morning.

South Korea’s Business Survey Index on business conditions in the manufacturing sector fell to 86 in May, from 87 a month ago, exerting pressure on the KRW/USD forex pair.

What’s happening: Shares of Best Buy Co rose on Tuesday, even as the company reported mixed results for its first quarter.

 What happened: The Richfield, Minnesota-based company lowered its annual guidance, joining the list of other retailers to reflect the impact of surging inflation and supply chain issues.

However, Best Buy managed to exceed expectations for one of its major metrics in the latest quarter.

How were the results: The electronics retailer reported a decline in sales for the first quarter but its top-line results still exceeded market views.

• Sales declined by 8.5% year-over-year to $10.65 billion, but surpassed the consensus estimate of $10.43 billion.
• Adjusted earnings fell 29.6% from the same period last year to $1.57 per share, missing Street expectations of $1.63 per share.

Why it matters: Surging inflation has impacted the top- and bottom-line of almost every retailer, with a decline in consumer spending across goods due to spiking prices to accommodate higher raw material costs. Several retailers, including Walmart, Target and now Best Buy, posted their worst earnings miss in at least five years.

Best Buy’s domestic revenues contracted by 8.7% year-over-year, while international revenues fell 5.4% in the first quarter. Enterprise comparable sales declined by 8%, compared 37.2% growth in the previous year.

Best Buy’s gross profits contracted 13.3% from a year ago to $2.4 billion, with margins shrinking 120 basis points to 22.1%.

“As we shared at our Investor Update in March, we expected our FY23 financial results to be softer than last year as we lap stimulus and other government support, the CE industry cycles the last two years of unusually strong demand, and we continue to invest in our future. In addition, we planned for increased promotional activity and higher supply chain expenses,” CEO Corie Barry said during the earnings call.

Best Buy lowered its fiscal 2023 sales guidance to between $48.3 billion and $49.9 billion, from its earlier forecast of between $49.3 billion and $50.8 billion. Management also reduced the adjusted earnings outlook to $8.40-$9.00 per share, from the prior guidance of $8.85-$9.15 per share.

The company’s board authorised the payment of a regular quarterly cash dividend of 88 cents per share.

 How shares responded: Best Buy’s shares gained 1.2% to close at $73.47, after the release of quarterly results on Tuesday. The stock had tumbled more than 16% over the past week amid a broader retail selloff.

What to watch: Investors will continue assessing rising inflation levels and supply chain issues, both of which could impact the company’s overall results in the current quarter.

The markets today

Crude oil will be in focus today ahead of the EIA’s (Energy Information Administration) report on stockpiles

Context: US crude oil futures edged lower on Tuesday amid concerns around restrictions in China to implement its zero-covid-19 policy.

 Details: Oil prices received some support earlier in the session on optimism around China’s plans to ease lockdown restrictions in Shanghai. However, traders remained concerned about crude demand from the country due to rising quarantine efforts in Beijing to curb the spread of covid-19.

Investors were also concerned about the risk of a global recession, which is expected to impact fuel consumption around the world. Traders also monitored the European Union’s plans to phase out Russian oil imports following Moscow’s invasion of Ukraine.

West Texas Intermediate crude for July delivery fell 52 cents, or 0.5%, to close at $109.77 a barrel on the NYMEX on Tuesday. July Brent crude rose 14 cents, or 0.1%, to $113.56 per barrel on ICE Futures Europe.

In other energy trading, June gasoline rose 0.4% to $3.811 a gallon, while June natural gas futures added 0.6% to settle at $8.796 per million British thermal units.

 What to watch: Traders await the release of EIA’s data on crude oil stockpiles today. US crude inventories, which unexpectedly contracted by 3.394 million barrels in the week ending May 13, are expected to decline by 0.737 million in the latest week.

Other Markets: European trading indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.39%, 1.80%, 1.66% and 1.14%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s GfK consumer climate indicator and gross domestic product, Saudi Arabia’s balance of trade, France’s consumer confidence, Spain’s producer price inflation, France’s initial jobless claims and unemployed persons, Mexico’s balance of trade, GDP growth rate, economic activity and current account, US MBA Mortgage applications, durable goods orders, gasoline inventories, heating oil stocks, distillate stockpiles, Cushing crude oil stocks and FOMC minutes, Russia’s producer price inflation, as well as Brazil’s current account and foreign direct investment.

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