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Trends & Analysis
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HP joins the tech layoff spree

 

Thursday, November 24, 2022, 8.45am GMT

The news shaping the markets today

Russian missiles hit Ukraine’s energy facilities, resulting in large regions of the country going into darkness. Despite this, the US dollar index traded lower this morning.


Korea’s central bank raised its base rate by 25bps to 3.25% at its latest meeting, sending borrowing costs to their highest since June 2012. The news supported the KRW/USD forex pair.


Japan’s services PMI fell to 50.0 in November, versus 53.2 in the previous month. Despite the decline, the figure showed no change in the country’s business activity and sent the JPY/USD pair higher in forex trading this morning.


Argentina’s monthly GDP growth declined to 4.80% year-over-year in September, from 6.40% in the previous month, exerting pressure on the ARS/USD forex pair.


Sri Lanka’s central bank held its benchmark interest rates at a record high of 14.5% at its recent meeting, which sent the LKR/USD pair lower in forex trading this morning.

 

What’s happening: Shares of HP Inc gained on Wednesday after the company announced quarterly results and restructuring.

What happened: HP is looking to reduce its global workforce by around 12% by the end of fiscal 2025.

Shares of the PC maker edged higher despite management issuing a weak profit forecast for the first quarter.

How were the results: The Palo Alto, California-based company reported a double-digit decline in revenues for its fiscal fourth quarter, but the figure still topped market views.

  • Net revenues declined by 11.2% year-over-year to $14.8 billion but surpassed the consensus estimate of $14.68 billion.
  • Non-GAAP earnings fell to 85 cents per share, exceeding Street expectations of 84 cents per share.

Why it matters: Several big companies in the US, including Amazon, Meta Platforms and Cisco Systems, have recently announced major layoffs to navigate a potential economic downturn. Twitter laid off more than half of its employees, while Seagate Technology reduced around 3,000 jobs.

HP, which has around 50,000 employees, said it is looking to cut between 4,000 and 6,000 jobs by the end of fiscal 2025. The latest announcement came at a time when sales of PCs and laptops are declining due to a reduction in customer discretionary spending amid high inflation.

“Looking forward, the new Future Ready strategy we introduced this quarter will enable us to better serve our customers and drive long-term value creation by reducing our costs and reinvesting in key growth initiatives to position our business for the future,” CEO Enrique Lores said during the earnings call.

Sales in HP’s Personal Systems Group declined 13% to $10.3 billion, with a 25% plunge in consumer sales. Sales in the company’s Printing unit also contracted by 7% to $4.5 billion.

One of the HP’s major rivals, Dell Technologies, also reported a 6% decline in revenues for the latest quarter citing shrinking PC sales.

HP projected labour and non-labour costs of around $1.0 billion associated with restructuring and other charges in fiscal 2022 and around $600 million in fiscal year 2023.

The company also issued a downbeat earnings forecast, saying it expects demand softness to continue in the near term.

Management projected non-GAAP earnings of 70-80 cents per share for the fiscal first quarter, below market expectations of 86 cents per share. They also guided to non-GAAP earnings of $3.20-$3.60 per share for fiscal 2023, short of the average analyst expectations of $3.62 per share.

HP increased its quarterly dividend by 5% year-over-year to 26.25 cents per share.

How shares responded: HP’s shares gained 1.8% to close at $29.91 on Wednesday. The stock has lost around 21% year to date.

What to watch: Investors will keep an eye on the sales of personal computers and laptops, with expectations of some rebound during the shopping season.

The markets today

European stocks will be in focus today after closing mostly higher on Wednesday

Context: Markets in Europe closed mostly higher on Wednesday with investors assessing economic reports from the Eurozone.

Details: Eurozone’s economic data showed a better-than-expected PMI for November. Eurozone’s services PMI came in unchanged at 48.6 in November, but beat consensus estimates of 48. Manufacturing PMI for the common bloc climbed to 47.3 in November, from 46.4 a month ago, and topped market expectations of 46.

Investors awaited minutes from the recent Federal Reserve meeting, which was released after the European stock markets closed on Wednesday.

The pan-European Stoxx 600 index gained 0.6% to close at 438.82. Travel and leisure stocks were among the top performers, while retail and mining stocks also gained about 1.8% each in the session.

The European blue-chip index had settled Tuesday’s trading session at its strongest level in three months.

The S&P Global Composite PMI for Germany climbed to 46.4 in November, ahead of market expectations of 44.9. However, France’s Composite PMI declined to 48.8 in November, from 50.2 in the prior month. Germany’s DAX 40 gained 0.04%, while France’s CAC 40 added 0.32%.

UK’s services PMI came in at 48.8 in November, higher than market expectations of 48. London’s FTSE 100 gained 0.17% to close at 7,465.24.

What are expectations: Traders will keep an eye on the ECB’s next monetary policy meeting. Comments from several ECB officials will also remain in focus today.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.28%, 0.59% and 0.97%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0415 and 1.0429 Negative
USD/CAD – 1.3336 and 1.3348 Positive
Gold – 1753.45 and 1757.15 Positive
WTI Crude Oil  – 77.68 and 77.84 Negative
FTSE 100 – 7461.30 and 7474.75 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0432, 0.36%) Dow ($34,263, 0.15%) Brent ($84.98, -0.2%)
GBP/USD (1.2093, 0.32%) S&P500 ($4,042, 0.21%) WTI ($77.79, -0.2%)
USD/JPY (138.85, -0.53%) Nasdaq ($11,894, 0.27%) Gold ($1,754, 0.5%)

What else to watch today

Saudi Arabia’s balance of trade, Turkey’s manufacturing confidence index, capacity utilization, foreign exchange reserves and Central Bank of Turkey’s interest rate decision, France’s manufacturing climate indicator and business climate indicator, Germany’s Ifo business climate indicator, Ifo current conditions subindex and Ifo expectations, South Africa’s producer price inflation and South African Reserve Bank interest rate decision, Brazil’s FGV consumer confidence, consumer prices and government revenues, UK’s CBI industrial trends orders, Mexico’s inflation and monetary policy meeting minutes, Canada’s average weekly earnings, as well as Argentina’s consumer confidence indicator, leading economic indicator, retail sales and Argentina central bank interest rate decision.

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