Today’s headlines

What’s happening: Shares of Alibaba Group Holding Limited tumbled on Thursday, after the company released results for its second quarter.

What happened: China’s ecommerce leader reported quarterly sales slightly above market estimates.

However, Alibaba made a major announcement regarding its cloud business, which exerted pressure on the stock.

How were the results: The Chinese tech company reported a single-digit increase in sales for the September quarter.

• Revenues grew by 8.5% to 224.79 billion yuan, slightly above the consensus estimates of 224.32 billion yuan.
• The company swung to a quarterly net profit of 27.7 billion yuan, versus a loss in the year-ago period.

Why it matters: The highly anticipated rebound in the Chinese economy has been erratic, with the industrial and retail sectors recording upbeat performances, while weakness has persisted in the real estate market and overall consumer confidence.

Alibaba has been looking to make a comeback after the covid-19 pandemic and the government’s crackdown on the tech sector. In March, the company had announced plans to carve out its cloud business into a separate entity in a major restructuring move.

Alibaba’s cloud business had been improving till last month, when the US decided to ban the export of chips used in artificial intelligence to China. Tencent Holdings, another leading tech firm in China, recently said the restrictions would have a significant impact on its cloud services.

Following this move by the US, Alibaba said on Thursday that it had scrapped the plans to spin-off its cloud business. The company also announced plans to put a hold on the IPO of its Freshippo groceries business while it evaluates market conditions.

“Core businesses are where we will keep our long-term focus, intensively invest resources, pursue R&D, enhance user experience,” CEO Eddie Wu said during the earnings call. “As for the non-core businesses, we will realise the value of these assets by turning them profitable as soon as possible or through other means of capitalisation,” he added.

Customer management revenues from the company’s commerce retail vertical grew by 3% year-over-year in the latest quarter, driven by Taobao and Tmall. Revenues from Alibaba International Digital Commerce jumped 53% and Local Services Group revenues climbed 16%.

How shares responded: Alibaba’s US-listed shares fell 9.1% to close at $79.11 on Thursday, following the release of quarterly results. The stock has lost around 14% year to date.

What to watch: Investors will continue monitoring China’s economic recovery and the US sanctions on chips, both of which could significantly impact Alibaba’s overall results ahead. Markets will also watch the company’s plans as it evaluates market conditions.

The markets today

The British pound will be in focus today ahead of retail sales data

Context: The GBP/USD forex pair traded almost flat on Thursday, after notching a notable increase earlier in the week.

Details: The British pound had risen sharply earlier in the week, hitting a two-month high versus the US dollar, following softer-than-expected inflation data from the US. However, some of those gains faded as the week progressed.

Data released this week showed UK headline inflation easing to 4.6% year-over-year in October. Thie figure also came in better than market expectations of 4.8%. The annual inflation rate in the US also slowed to 3.2% in October, from 3.7% in September.

Growing speculations of the Federal Reserve having come to the end of its monetary tightening policy resulted in weakness in the US dollar, lending support to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell to 104.35 on Thursday.

The GBP/USD forex pair traded almost flat at 1.2413 on Thursday. London’s FTSE 100 fell 1.01% to close at 7,410.97, after hitting a four-week high in the prior session, while the FTSE 250 dipped 1.74% to settle at 18,351.48.

What to watch: Investors await data on retail sales from the UK today. The country’s retail sales, which contracted by 0.9% in September, is expected to grow by 0.2% in October. Analysts expect retail sales to decline by 2.4% year-over-year in October, following a 1% decline in September.

Other Markets: US trading indices closed mixed on Thursday, with the S&P 500 and Nasdaq 100 up by 0.12% and 0.10%, respectively, and the Dow Jones index down by 0.13%.

The news shaping the markets

Russian military forces intensified attacks on different areas of Ukraine’s southern Kherson region. The news sent the safe-haven US dollar index slightly higher this morning.

Singapore’s non-oil domestic exports fell by 3.4% year-over-year in October. This being the 13th straight month of contraction exerted pressure on the SGD/USD forex pair.

New Zealand’s producer input prices rose by 1.2% in the three months to September, versus a 0.2% decline in the prior quarter, which sent the NZD/USD pair lower in forex trading this morning.

Colombia’s trade deficit shrank to $0.8163 billion in September, versus a year-ago deficit of $1.917 billion. However, exports declining 13.6% to $4.13 billion, representing the 10th straight monthly decline, exerted pressure on the COP/USD forex pair.

Canada’s housing starts rose by 1% to 274,700 units in October. The figure topping market estimates of 252,900 units sent the CAD/USD pair higher in forex trading this morning.

What else to watch today

Eurozone’s current account and inflation rate, Spain’s balance of trade and consumer confidence indicator, Italy’s current account, India’s bank loan growth, value of deposits and foreign exchange reserves, Canada’s Industrial producer prices, raw materials price index and foreign investment in Canadian securities, US building permits, housing starts and Baker Hughes crude oil rigs, China’s foreign direct investment, Brazil’s industrial entrepreneur confidence index, as well as Argentina’s balance of trade.