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Facebook Parent Meta Reports Upbeat Sales

The news shaping the markets today

Japan’s services PMI fell to 47.6 in January, from 52.1 a month ago. Although the latest reading signalled the first contraction in services activity in four months, the JPY/USD pair rose slightly in forex trading this morning.


Australia’s trade surplus shrank to A$8.36 billion in December, from A$9.76 billion in the prior month. This was the lowest trade surplus since March 2021 and exerted pressure on the AUD/USD forex pair.


The Central Bank of Brazil boosted the Selic rate by 150 basis points to 10.75% during its latest meeting. However, the BRL/USD pair remained flat in forex trading this morning.


South Korea’s manufacturing PMI improved to a six-month high of 52.8 in January, from 51.9 in the previous month. Despite output increasing for the first time in four months, the KRW/USD forex pair remained under pressure after the news.


Ireland’s services PMI climbed to 56.2 in January, from a nine-month low of 55.4 in the previous month. However, the EUR/USD pair declined slightly in forex trading this morning.

 

What’s happening: Shares of Meta Platforms fell sharply in after-hours trading on Wednesday, despite the company reporting upbeat revenues for the fourth quarter.

What happened: The company released its first earnings report since changing its name from Facebook to Meta Platforms.

Despite the higher revenues, investors were disappointed that the company missed profit expectations and issued a weak forecast.

How were the results: The Menlo Park, California-based company reported upbeat revenues for the fourth quarter, but its earnings fell short of market views.

  • Revenues climbed to $33.67 billion, from $28.07 billion in the year-ago quarter, topping market expectations of $33.40 billion.
  • Net income came in at $10.29 billion, or $3.67 per share, missing the consensus estimate of $3.85 per share.

Why it matters: The company, which was recently renamed Meta Platforms, said its bottom-line was hit by privacy changes in Apple’s iOS policies as well as advertisers lowering their budgets due to supply chain issues.

Users also shifting to products like Reels that do not bring as much revenue for the company as Feeds and Stories. Meta Platforms reported a 13% year-on-year increase in ad impressions delivered for the fourth quarter, with ad prices rising 6%.

Meta said there were 2.91 billion monthly active users for Facebook, flat from the previous quarter’s figures. Daily active users rose 5% to 1.93 billion at yearend 2021. Advertising revenues came in at $32.6 billion in the quarter. Social media ad spend contributes around 97% of the company’s overall revenues.

The company had previously announced plans to split its hardware business into a separate division called Reality Labs, while its core business would be its Family of Apps segment, comprising of Facebook, Instagram, Messenger, and WhatsApp.

Revenues from Reality Labs surged to $877 million, from $558 million in the previous quarter and $717 million in the year-ago quarter. However, the segment recorded an operating loss of $3.3 billion. Family of Apps generated revenues of $32.79 billion and an operating income of $15.89 billion.

Management projected revenue between $27 billion and $29 billion for the current quarter, which came in short of the market expectations of around $30 billion. The company also said expects its ticker to change to META in the first half of this year.

How shares responded: Shares of Meta Platforms plummeted 22.9% to $249.05 in after-hours trading, following the release of quarterly results on Wednesday. The stock had shed around 5% over the past month. Shares of other social media giants, including Twitter, Pinterest and Snap also fell in response to Meta’s performance.

What to watch: Investors will keep an eye on the performance of Meta’s ad revenues as the global economy recovers. Markets will also monitor the company’s rival video-sharing app TikTok, which is posing stiff competition to Reels. 

The markets today

The British pound will be in focus today ahead of Bank of England’s interest rate decision

 

Context: The British pound recorded gains on Wednesday, rising for a fourth straight session.

Details: In December last year, the Bank of England became the first central bank of a major economy to increase interest rates since the onset of the pandemic. Markets are now projecting rate hikes of 100 bps this year.

Currency markets seemed to shrug off the political turmoil that resulted from Prime Minister Boris Johnson attending parties during the pandemic-related lockdown. Senior Conservative lawmaker Tobias Ellwood announced plans to call for a confidence vote on Johnson’s leadership.

The GBP/USD forex pair surged to a 1.5 week high on Wednesday, ahead of the Bank of England’s rate decision, with markets expecting a hike. Positive sentiment across global stock markets also drove gains for risk-on currencies ahead of the monetary policy meetings of the ECB and Bank of England. London’s FTSE 100 rose 0.8% on Wednesday, extending gains for a second straight session.

The GBP/USD forex pair gained around 0.4% to reach 1.3574 on Wednesday, reaching its strongest level since January 21. The British currency also edged higher versus the euro to trade at 83.29 pence, inching closer to its highest level since February 2020.

What to watch: Traders await Bank of England’s interest rate decision. The central bank had voted to increase its benchmark rate by 15bps to 0.25% at its December meeting due to rising inflation. Analysts expect BoE to raise interest rates by another 0.25% during its meeting today.

The release of services and composite PMIs will also remain in focus today. The IHS Markit/CIPS services PMI is expected to decline slightly 53.3 in January, from 53.6 in the prior month, while the composite PMI is projected to slip to 53.4, from the previous reading of 53.6.

Other Markets: US indices closed higher on Wednesday, with the Dow Jones, S&P 500 and Nasdaq 100 up by 0.63%, 0.94% and 0.80%, respectively.

Support & resistances for today

Technical Levels News Sentiment

Dow Jones – 35,595.45 and 35,664.16



Positive


EUR/GBP – 0.8330 and 0.8338


Negative


GBP/USD – 1.3552 and 1.3563


Negative


Nikkei 225 – 27,161.50 and 27,291.00


Positive


WTI Crude Oil – 87.62 and 87.74 Negative

 

Market snapshot

What else to watch today

Turkey’s consumer prices, producer price inflation and foreign exchange reserves, South Africa’s IHS Markit PMI, Spain’s services PMI and composite PMI, Italy’s services PMI and composite PMI, France’s composite PMI and services PMI, Germany’s services PMI and composite PMI, Eurozone’s composite PMI, services PMI, producer prices, and ECB’s interest rate decision, US Logistics Manager’s Index, unit labour costs, nonfarm labour productivity, initial jobless claims, services PMI, composite PMI, ISM services PMI, factory orders and EIA’s natural gas stocks change, Mexico’s consumer confidence indicator, as well as Brazil’s services PMI and composite PMI.


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