The news shaping the markets today

Russia is all set to formally annex four of Ukraine’s regions today, which include Donetsk, Luhansk, Zaporizhia and Kherson. The news sent US crude oil futures higher this morning.

China’s official NBS non-manufacturing PMI fell to a four-month low of 50.6 in September, from 52.6 in the previous month, exerting pressure on the CNY/USD forex pair.

Colombia’s central bank raised its benchmark rate by 100bps to 10.0%. however, the COP/USD pair remained flat after the announcement.

Japan’s industrial production grew by 2.7% in August, following 0.8% growth a month ago. Despite the figure coming in higher than the consensus estimate of 0.2% growth, the JPY/USD forex pair remained under pressure.

Mexico’s central bank lifted its benchmark policy rate by 75 bps to 9.25% at its September meeting. However, the MXN/USD pair fell in forex trading this morning, mainly due to the strengthening US dollar.

What’s happening: Shares of Nike fell in after-hours trading on Thursday, after the company
released results for its first quarter.

What happened: The world’s largest sportswear maker managed to beat estimates for the
quarter amid some growth in overall revenues.

However, sales at one of its major regions declined and inventories grew, exerting pressure on
the stock in extended trading.

How were the results: The Beaverton, Oregon-based company reported a double-digit decline in earnings for the three months ended August 31, but the figure still came in above market estimates.

• Revenues grew 4% year-over-year to $12.7 billion, topping the consensus estimate of $12.27 billion.
• Profits contracted by 22% to $1.5 billion, or 93 cents per share, from $1.9 billion, or $1.16 per share, in the year-ago period. The figure was slightly higher than the Street expectations of 92 cents per share.

Why it matters: Several retailers, including Under Armour and Target, were forced to offer heavy discounts in the quarter due to the piling up of inventories. Nike’s inventories also grew amid a slowdown in demand for its Jordan and Converse brands.

The company’s overall inventories surged 44% to $9.7 billion by the end of the quarter, while inventories in its North American market grew 65%.

Nike’s gross margins came under pressure with the strengthening of the US dollar. Gross margins narrowed 220 basis points to 44.3%, versus projections of 45.4%.

Management guided to a further contraction in gross margins by between 200 and 250 basis points for the full year. For the ongoing quarter, the company expects margins to contract by 350 to 400 basis points versus last year.

Nike expects the strength of the greenback to continue impacting its international business, as it generates more than half of its overall revenues from outside North America. As a result, management said annual revenues could take a hit of $4 billion due to the surging US dollar.

Nike’s China sales fell 16% year-over-year to $1.65 billion in the quarter but came in line with market estimates. Its North American revenues climbed 15% to $5.5 billion, driven by a 17% surge in sales of footwear. However, the company’s Europe, Middle East and Africa segments contributed the most, where sales climbed 23% during the quarter.

Nike projected revenue growth of low double digits for the second quarter. For fiscal 2023, the company sees low-to-mid single-digit growth in revenues.

How shares responded: Nike’s shares fell 9.4% to $86.41 in after-hours trading on Thursday, following the release of quarterly results. The stock has lost around 12% over the past month.

What to watch: Investors will keep an eye on the company’s inventory level, which continues to grow. Markets will also monitor the strength of the US dollar.

The markets today

European stocks will be in focus today ahead of a basket of economic data

Context: European stocks settled lower on Thursday, after recording gains in the previous session.

Details: Equity markets around the world saw another volatile trading session, with stocks trading lower on concerns around the global economy.

Market sentiment was also impacted by data on Germany’s consumer price inflation, which accelerated to 10% year-over-year in September to reach the highest level on record. The figure was much higher than the consensus estimate of 9.4%. However, Spain’s consumer price inflation eased to 9.0% year-over-year in September.

Eurozone’s consumer confidence indicator declined by 3.8 points to -28.8, with the economic sentiment indicator shedding 3.6 points to reach 93.7 for September.

The British pound hovered around record lows versus the greenback. Although the GBP/USD rose on Wednesday after the Bank of England announced plans to start buying long-dated bonds to provide some support to financial markets, the forex pair resumed its downturn on Thursday.

London’s FTSE 100 fell around 1.8% to close at 6,881.59 on Thursday, declining to its weakest level since July 2021, with utilities and real estate shares leading the downturn.

The pan-European Stoxx 600 fell 1.67% to close at 382.89 on Thursday, with auto stocks being among the worst performing. The basic resources sector bucked the overall market trend, gaining around 0.5%.

The CAC 40 declined by 1.53% to settle at around a 20-month low of 5,676.87, while Germany’s DAX 40 fell 1.71% to close at 11,975.55.

What to watch: Investors await the release of economic data on the inflation rate, unemployment rate and consumer prices from the Eurozone today. The bloc’s annual inflation rate had accelerated to 9.1% in August, from 8.9% in July, and is expected to rise further to 9.7% in August. Analysts expect the unemployment rate to rise to 6.7% in August, from 6.6% in July.

Other Markets: US indices closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.54%, 2.11% and 2.86%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s retail sales, unemployment rate, import prices, number of unemployed persons and unemployment change, UK’s current account, GDP Growth rate, business investment, mortgage lending, mortgage approvals and net lending to individuals, France’s inflation rate, personal spending and producer price inflation, Spain’s retail sales and current account, Turkey’s balance of trade, Italy’s unemployment rate and inflation rate, South Africa’s manufacturing PMI and balance of trade, India’s Central government budget value, foreign exchange reserves and infrastructure output, Brazil’s unemployment rate and government budget value, US personal spending, personal income, personal consumption expenditure price index, Chicago PMI, University of Michigan consumer sentiment and Baker Hughes crude oil rigs, as well as Russia’s money supply M2.

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