The news shaping the markets today

Ukraine’s President Volodymyr Zelensky blamed Russia “for terror” after the operator of the Zaporizhzhia nuclear power plant reported major damage at the facility. The news sent WTI crude oil prices higher this morning.

Japan reported a current account deficit of ¥132.4 billion in June, following a year-ago surplus of ¥739.6 billion. The first current account deficit since January exerted pressure on the JPY/USD forex pair.

China’s trade surplus surprisingly widened to a new record peak of $101.26 billion in July, from $55.89 billion in the year-ago month. Despite the figure beating market estimates of $90 billion, the CNY/USD pair fell slightly in forex trading this morning.

The Philippines reported a decline in the unemployment rate to 6% in June, from 7.7% in the year-ago month. However, the PHP/USD forex pair remained under pressure.

Moody’s lowered Italy’s outlook from stable to negative, just weeks after the resignation of Prime Minister Mario Draghi, which sent the EUR/USD pair lower in forex trading this morning.

What’s happening: Shares of Western Digital fell on Friday, despite the company reporting better-than-expected earnings for its fiscal fourth quarter.

What happened: Although Western Digital reported a decline in overall revenues for the latest quarter, revenues at one of its major segments surged.

Investors grew concerned after a leading analyst cut the price target for the company, following the release of its quarterly report.

How were the results: The San Jose, California-based company reported a decline in sales for its fourth quarter, but the figure topped market views.

• Revenues declined by 8% year-over-year to $4.53 billion, exceeding the consensus estimate of $4.49 billion.
• Non-GAAP earnings came in at $1.78 per share, higher than the Street expectations of $1.68 per share.

Why it matters: Western Digital has been facing stiff competition, which impacted its performance in the latest quarter and led to management issuing another weak forecast.

Amid ongoing supply issues and growth concerns, one of Western Digital’s biggest rivals, Seagate, missed market expectations for its fiscal Q4 and provided weak guidance for Q1.

Western Digital’s cloud revenues grew 5% year-over-year to $2.1 billion, while client revenues contracted by 14% to $1.64 billion and consumer revenues fell 23% to $793 million.

The company’s non-GAAP gross margins widened 60 bps to 32.3% during the quarter. It held cash and equivalents worth $2.33 billion.

Management projected Q1 revenues of $3.60-$3.80 billion, short of the consensus estimate of $4.74 billion. They guided to non-GAAP earnings of 35-65 cents per share, also missing analyst expectations of $1.96 per share.

Following the quarterly announcement, a Rosenblatt Securities analyst reduced the price target for the company from $60 to $45, while maintaining a Neutral rating on the stock.

How shares responded: Western Digital’s shares fell to as much as $45.04 on Friday but closed the session lower by 5.7% at $47.09. The stock has lost around 29% year to date.

What to watch: Markets will keep an eye on developments around Elliott Investment Management’s earlier offer to invest in the company’s flash business.

The markets today

The US dollar will be in focus today following the release of the NFP report

Context: The greenback recorded sharp gains across the board on Friday, after the US reported better-than-expected payroll data.

Details: The Labor Department said nonfarm payrolls had surged by 528,000 jobs in July, representing the biggest increase since February and topping market expectations of 250,000.

Data for June was also revised higher to show an addition of 398,000 jobs, with job gains for July signalling the 19th consecutive month of expansion in payrolls. The unemployment rate fell to a pre-pandemic low of 3.5% in July.

The US dollar moved sharply higher, as the jobs report gave a strong backdrop for the Federal Reserve to continue its aggressive monetary tightening policy.

The Fed had hiked its benchmark rate by three-quarters of a percentage point at its latest meeting. The US central bank had raised interest rates by 225 basis points since March.

The USD/JPY forex pair jumped 1.56% at 135.01 yen on Friday, representing the largest daily percentage increase since mid-June. The greenback ended the week higher by around 1.3%.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, gained 0.48% to reach 106.58 on Friday. The dollar index gained around 0.6% in the week.

The GBP/USD forex pair fell 0.7% to 1.2069 on Friday, a day after the Bank of England increased rates by the most in 27 years in a bid to combat inflation. The EUR/USD declined 0.6% to close at 1.0184 on Friday.

What to watch: Traders will keep an eye on announcements by Fed speakers and any upcoming economic reports.

Other Markets: European trading indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.11%, 0.65%, 0.63% and 0.76%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Central Bank of Brazil’s focus market readout, France’s 3-month BTF auction, 6-month BTF auction and 12-month BTF auction, as well as the US 3-month bill auction and 6-month bill auction.