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News

JD.com shares shorted despite earnings beat

 

Friday, March 10, 2023

The news shaping the markets today

Russia fired hypersonic missiles across Ukraine, with the new wave of strikes killing at least nine people. Despite the ongoing tensions, the safe-haven US dollar index fell this morning.


South Korea posted a current account deficit of $4.52 billion in January, versus a year-ago surplus of $2.24 billion, exerting pressure on the KRW/USD forex pair.


The Bank of Japan held its key short-term interest rate unchanged at -0.1% at its latest meeting, which sent the JPY/USD pair lower in forex trading this morning.


New Zealand’s BusinessNZ Performance of manufacturing index rose to 52 in January, versus a revised reading of 51.2 in the previous month, lending support to the NZD/USD forex pair.


US jobless claims climbed by 21,000 to 211,000 in the week ending March 4, the most since December 2022, which sent the Dow Jones index lower by more than 500 points on Thursday.

 

What’s happening: Shares of JD.com fell on Thursday, after the company released results for its fourth quarter.

What happened: The Chinese ecommerce firm posted better-than-expected earnings for the latest quarter on Thursday.

However, investors grew concerned around the sharp decline in JD.com’s sales growth.

How were the results: The Beijing-based company swung to a profit in the three months ended December, with the bottom-line figure topping market estimates.

  • Revenues climbed 7.1% to 295.4 billion yuan, missing the consensus estimates of 296.2 billion yuan. The figure marked a deceleration from the 23% growth recorded in the year-ago quarter.
  • Net income attributable to ordinary shareholders came in at 3 billion yuan, versus a year-ago net loss of 5.2 billion yuan.
  • Non-GAAP net income per ADS was 70 cents, beating analyst expectations of 50 cents.

Why it matters: The Chinese government had imposed strict covid-19 restrictions to contain the spread of infections, which resulted in weak consumption in the country and impacted JD.com and its larger peer Alibaba.

China’s exports and imports continued to contract during the first two months of 2023, clouding prospects of a rebound in the economy.

Customers held back their spending due to uncertainty in the economic environment, with parts of the country remaining under restrictions for most of the final quarter of 2022. Alibaba had also posted a mere 2.1% increase in quarterly revenues for the quarter.

JD.com’s online direct sales rose 1% year-over-year, below consensus estimates of 4%. The company announced plans to launch a 10-billion-yuan discount program in China, fuelling concerns around a fresh wave of competition in the country’s ecommerce market.

In January, JD.com had announced plans to wind down its ecommerce business in Indonesia and Thailand due to stiff competition.

The board authorised a cash dividend of 31 cents per ordinary share, or 62 cents per ADS. It generated free cash flows of $1.75 billion and held $32.8 billion in cash and equivalents.

How shares responded: JD.com’s shares fell 11.3% to close at $41.68 on Thursday, following the release of quarterly results. The stock has lost more than 32% over the past six months.

What to watch: Investors will keep an eye on the recovery in China’s economy. Rising competition from companies like Tencent-backed Kuaishou and ByteDance will also remain one of the major concerns for JD.com.

The markets today

The British Pound will be in focus today ahead of a basket of economic reports

Context: The GBP/USD forex pair moved higher on Thursday amid some softness in the US dollar.

Details: Traders are still focused on the global interest rate outlook, after US Federal Reserve Chairman Jerome Powell indicated that the central bank could announce even bigger rate hikes ahead.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.4% to 105.31 on Thursday.

The British Chambers of Commerce recently said that the economy seemed to be on course to contracting in 2023, but at a slower pace than was earlier anticipated.

Apart from some major economic reports due to be released today, markets are also focussed on employment and wage data, scheduled for March 14. UK’s finance minister Jeremy Hunt is also set to announce his new budget next week.

The Bank of England will meet on March 23 and markets expect policymakers to announce a rate hike of 25 basis points.

The GBP/USD forex pair added around 0.7% to reach 1.1924 on Thursday. However, the sterling may still end the week around 1% lower versus the greenback due to the Fed’s hawkish comments.

What are expectations: Traders await economic reports on GDP, balance of trade and industrial production from the UK today. The British economy, which contracted by 0.5% in December, is expected to grow by 0.1% in January. Analysts expect industrial production to decline 0.3% in January, following 0.3% growth in the previous month. The UK trade deficit, which widened to to £7.2 billion in December, is projected to narrow to £6.1 billion in January.

Other Markets: European indices closed mostly lower on Thursday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.63%, 0.12% and 0.22%, respectively, and the DAX 40 up by 0.01%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0582 and 1.0596 Positive
USD/CHF – 0.9301 and 0.9321 Negative
Nasdaq 100 – 11972.54 and 12033.33 Positive
DAX 40  – 15628.00 and 15646.17 Positive
Silver  – 20.018 and 20.101 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0596, 0.10%) Dow ($32,367, -0.48%) Brent ($81.23, -0.4%)
GBP/USD (1.1919, -0.04%) S&P500 ($3,900, -0.50%) WTI ($75.24, -0.6%)
USD/JPY (136.62, 0.35%) Nasdaq ($12,098, -0.38%) Gold ($1,833, -0.1%)

What else to watch today

Germany’s consumer price inflation, Turkey’s unemployment rate, industrial production and labour force participation rate, UK’s goods trade balance, manufacturing production and construction output, France’s balance of trade and current account, Spain’s retail sales, Italy’s producer price inflation, India’s foreign exchange reserves, value of deposits, value of loans, industrial production and manufacturing production, Brazil’s consumer price inflation and industrial entrepreneur confidence index, Canada’s unemployment rate and employment change, US Non-farm payrolls, unemployment rate, average hourly earnings, Baker Hughes crude oil rigs and government budget, Russia’s inflation rate and corporate profits, as well as China’s total vehicle sales, new yuan loans, outstanding yuan loans, total social financing and money supply M2.


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