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Thursday, June 02, 2022
Russia increased its attack on the eastern Ukraine city of Severodonetsk, with military forces taking control of 70% of the key industrial hub. Investor concerns related to the conflict sent the US dollar index higher this morning.
Australia’s retail sales grew by 0.9% to another record high of A$33.9 billion in April. However, this was a slowdown from March’s 1.6% growth, which exerted pressure on the AUD/USD forex pair.
South Korea’s manufacturing PMI fell to 51.8 in May, from 52.1 in the previous month, sending the KRW/USD pair lower in forex trading this morning.
New Zealand’s merchandise terms of trade rose 0.5% during the three months to March, compared to a 0.9% decline in the earlier quarter. However, the NZD/USD forex pair remained under pressure.
Indonesia’s manufacturing PMI eased to 50.8 in May, from 51.9 a month ago. This being the ninth consecutive month of growth in factory activity sent the IDR/USD pair higher in forex trading this morning.
What’s happening: Shares of Hewlett Packard Enterprise Company fell in after-hours trading on Wednesday, following the release of second-quarter results.
What happened: Hewlett Packard Enterprise said its quarterly results were impacted by the closing of operations in Russia.
The Houston, Texas-based company also lowered its financial projections for the fiscal year ending in October.
How were the results: The enterprise hardware and services company reported some growth in revenues for the fiscal second quarter ending April 30, but the figure still fell short of market views.
Why it matters: In February, HPE stopped shipments and sales to Russia and Belarus, with the intension of closing all operations in the two countries.
Management said that while order growth remained strong, the company was unable to convert the robust demand into sales due to supply chain disruptions. Ongoing supply chain bottlenecks continued to impact the company’s sales, with lockdowns in China restricting its ability to meet demand. Lockdowns in China and the impact from Russia weighted on the company’s results, costing $250 million in the quarter.
The company’s orders grew 20%, representing the fourth straight quarter of order growth of 20% or more. Revenues from the company’s Intelligent Edge service grew 8% to $867 million, which is around half the growth rate in the year-ago quarter.
Gross margins narrowed 1.7 percentage points year-over-year to 32.4% due to charges related to Russia.
For the July quarter, the company said it sees non-GAAP earnings between 44 and 54 cents per share, compared to the consensus estimate of 52 cents per share. For fiscal 2022, management said they continue to see revenue growth of 3-4%. However, the full-year profit guidance was lowered to $1.96-$2.10 per share, from the prior forecast of $2.03-$2.17 per share.
How shares responded: Hewlett Packard Enterprise’s shares fell 6.8% to $14.70 in extended trading on Wednesday, following the release of quarterly results. The stock has gained around 5% over the past six months.
What to watch: Investors will keep an eye on the ongoing supply chain issues and the situation in Ukraine.
Context: Oil futures settled higher on Wednesday, with easing of covid-19 restrictions in Shanghai signalling higher energy demand.
Details: China had imposed lockdown restrictions in several regions due to its strict zero-covid policy. The lockdown in the country’s largest city, Shanghai, has been limiting gains in oil prices, which has remained above the $100 per barrel mark due to the ongoing war in Ukraine.
Shanghai eased some restrictions after a two-month lockdown. The city restored its complete bus and subway services and some rail connections. Factories are also set to resume work after several weeks of restrictions. However, at least 650,000 residents in the city are still under some kinds of restriction due to covid-19 cases.
Meanwhile, oil prices have been supported by the EU’s plans to impose a partial embargo on crude imports from Russia.
WTI crude for July delivery rose 59 cents, or 0.5%, to settle at $115.26 per barrel on the NYMEX on Wednesday. August Brent crude added 69 cents, or 0.6%, to close at $116.29 per barrel on ICE Futures Europe.
In other energy trading, July gasoline climbed 4% to $4.0716 a gallon, while July natural gas jumped 6.8% to $8.696 per million British thermal units.
What to watch: Traders await the release of data on crude oil inventories and natural gas stockpiles from the EIA today. US crude oil inventories had contracted by 1.019 million barrels in the week ending May 20 and are expected to decline by another 1.35 million barrels in the latest week. Working gas in storage in the US is projected to increase by 86 billion cubic feet in the latest week, following a 80 bcf rise in the previous week.
Traders will also keep an eye on the OPEC+ (Organization of the Petroleum Exporting Countries and their allies) meeting scheduled for today, with the group expected to exempt Russia from its output targets.
Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.98%, 0.33%, 0.77% and 1.04%, respectively.
|Technical Levels||News Sentiment|
|USD/JPY – 130.03 and 130.19||Positive|
|USD/CAD – 1.2669 and 1.2680||Negative|
|Gold – 1846.34 and 1847.64||Negative|
|Silver – 21.778 and 21.820||Negative|
|Nasdaq 100 – 12513.91 and 12609.68||Positive|
|Futures at 0400 (GMT)|
|EUR/USD (1.0654, 0.03%)||Dow ($32,789, -0.03%)||Brent ($114.18, -1.8%)|
|GBP/USD (1.2479, -0.06%)||S&P500 ($4,099, -0.01%)||WTI ($112.93, -2%)|
|USD/JPY (130.13, -0.02%)||Nasdaq ($12,554, 0.02%)||Gold ($1,848, -0.1%)|
Spain’s unemployment change, Brazil IPC-Fipe inflation, producer prices, balance of trade and GDP growth rate, Eurozone’s producer inflation, Italy’s car registrations, Mexico’s consumer confidence, Turkey’s foreign exchange reserves and Central Bank of Turkey’s MPC meeting summary, US Challenger job cuts, ADP employment change, initial jobless claims, unit labour costs, nonfarm labour productivity, continuing jobless claims, factory orders, gasoline inventories, heating oil stocks, distillate stockpiles and Cushing crude oil stocks, Canada’s total value of building permits, India’s balance of trade, exports, imports and money supply M3, as well as Argentina’s tax revenue.
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