Alibaba shares spike after earnings beat

The news shaping the markets today

Ukraine’s President Volodymyr Zelensky said at least seven people were killed and 10 million people are without power following a new wave of missile attacks by Russia. The news sent WTI crude oil prices higher this morning.

UK’s GfK consumer confidence indicator rose to -44 in November, rising for the second consecutive month, which lent support to the GBP/USD forex pair.

Japan’s annual inflation rate accelerated to 3.7% in October, from 3.0% in the prior month. Despite this being the highest reading since January 1991, the JPY/USD pair rose in forex trading this morning.

US initial jobless claims fell by 4,000 to 222,000 in the week ended November 12. However, the Dow Jones index still closed slightly lower on Thursday.

Eurozone’s consumer price inflation was revised lower to 10.6% year-over-year for October, from a preliminary reading of 10.7%, lending some support to the EUR/USD forex pair.

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

What happened: The Chinese ecommerce giant reported upbeat earnings for the quarter, despite a slowdown in the country’s retail spending.

Although the company managed to grow revenues, sales at one of its major segments declined.

How were the results: Alibaba reported single digit growth in revenues for the three months ending September 30.

• Revenue rose 3% to 207.18 billion yuan, missing market expectations of 208.62 billion yuan.
• Excluding one-time items, earnings came in at 12.92 yuan per ADS (American Depository Share), exceeding the consensus estimate of 11.62 yuan per share.

Why it matters: China reported a decline in retail spending this year due to its strict zero-covid policy, which weighed on overall economic activity.

Retail sales in China contracted by 0.5% in October, representing the first decline since May and coming in worse than market expectations of slight growth.

Revenues from Alibaba’s customer management segment, which generally contributes around 30% of overall revenue, declined 7%, the steepest downturn in the history of the division. Sales at the cloud segment grew just 4% from a year ago.

CEO Daniel Zhang said that the introduction of the 20-point pandemic measures by state authorities “can be expected to have a positive impact,” while adding that there may still be “some disruption to logistics in certain regions of the country.”

Alibaba’s financial affiliate, Ant Group, reported a profit of 7.72 billion yuan for the quarter ended June, representing a 63.2% year-over-year decline.

Alibaba spent $2.1 billion on share buybacks during the second quarter and said its board had added another $15 billion to its existing share repurchase program and extended its duration to the end of fiscal 2025.

How shares responded: Alibaba’s US-listed shares gained 7.8% to close at $84.26 on Thursday, following the release of quarterly results. The stock has lost around 30% year to date.

What to watch: Investors will keep an eye on rival JD.com, which recorded record sales at the 11.11 shopping festival. Alibaba’s other rivals, including Douyin and Kuaishou also reported strong numbers for the Singles Day events.

Markets will also continue monitoring Alibaba’s plans for primary conversion of shares to the Hong Kong Stock Exchange.

The markets today

UK stocks will be in focus today ahead of retail sales data

Context: British stocks edged lower on Thursday, after Finance Minister Jeremy Hunt revealed the budget plan.

Details: Jeremy Hunt announced several tax hikes and tighter public spending in his budget plan on Thursday.

Hunt announced plans to introduce a windfall tax on oil and gas companies and to impose a new temporary tax of 45% on electricity generators.

Data on Wednesday showed consumer prices increasing 11.1% in the twelve months to October, which was the highest reading since October 1981 and well above the 10.1% reported in the previous month. Most traders now expect the Bank of England to hike interest rates by 50 basis point at its December meeting.

Hunt said that the country’s economy is already in recession and warned of a GDP contraction in 2023.

The FTSE 100 index closed slightly lower by 0.06% at 7,346.54 on Thursday, after briefly tumbling to a one-week low. The domestically focused FTSE 250 rose 0.05% to close at 19,122.31.

What are expectations: Traders await data on retail sales from the UK today. Retail sales in the country declined by 1.4% in September and is expected to contract by another 0.1% in October.

Other Markets: US indices closed lower on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.02%, 0.31% and 0.19%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Italy’s construction output, South Africa’s building plans passed, India’s deposit growth, foreign exchange reserves and value of loans, Canada’s raw materials price index, foreign investment in securities and producer prices, as well as US existing home sales, CB leading index and Baker Hughes crude oil rigs.