Please see below article received from Brooks Macdonald this afternoon, which provides the latest update on global markets.
What has happened
Monday started with a more optimistic tone as earnings reports from Goldman Sachs and Bank of America both beat expectations, an important test after the misses from the financial sector last week. The news that Apple was set to slow hiring and spending in 2023 drove risk appetite lower however with US indices ending down for the day after a sell-off that took place after the European close.
European gas supplies
The timing of the reopening of the Nord Stream 1 pipeline remained high on investors’ agenda on Monday with Gazprom saying that they were unable to fulfil their supply obligations to at least one major customer due to ‘extraordinary’ circumstances. This added to a downbeat assessment of the security of European gas supplies ahead of Thursday’s scheduled reopening. In a sign that the high natural gas price is also weighing on utilities, Germany’s Uniper, applied to extend their credit line from state-owned KfW. There were also reports of a draft EU document that assessed the potential damage caused by a cut-off of Russian gas supplies, with EU GDP hit by 1.5% in the worst case scenario.
Earnings Season
Markets were happy to shrug off the concerns over European energy security earlier on Monday, focusing on the upcoming earning season. Goldman Sachs saw an almost 50% decline in net income for the second quarter but the results came in ahead of market expectations. Comments from the bank suggesting that they may look to pause hiring replacements for departing employees painted a more cautious assessment of the upcoming year however it required similar comments from Apple to catalyse the risk off tone late in the US session. Netflix reports later today and given the poor run of recent earnings results, and stock market reaction, investors will be watching the results closely. Markets may be less keen to extrapolate any Netflix weakness across the broader sector as in recent earnings seasons, at least some of Netflix’s weakness was idiosyncratic rather than a poll on the overall health of the technology sector.
What does Brooks Macdonald think
Yesterday’s price movements, driven by the earnings and guidance from companies, underlines how important corporate results are to market levels. So far this year we have seen heavy falls to the price of companies whilst the earnings expectations have remained robust. Whether or not the market is now ‘cheap’ is largely determined by how earnings develop over the next 12 months.
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World GBP | -0.8% | -0.9% | 4.6% | -9.3% | |
| MSCI UK GBP | 0.9% | 0.3% | 3.1% | 2.4% | |
| MSCI USA GBP | -1.8% | -1.4% | 6.2% | -9.9% | |
| MSCI EMU GBP | 0.8% | 1.1% | 0.5% | -16.4% | |
| MSCI AC Asia ex Japan GBP | 0.8% | -0.8% | 1.0% | -6.9% | |
| MSCI Japan GBP | -0.6% | -2.2% | 3.0% | -10.1% | |
| MSCI Emerging Markets GBP | 0.9% | -0.8% | 0.1% | -8.5% | |
| Bloomberg Sterling Gilts GBP | -0.5% | -0.4% | 1.2% | -15.0% | |
| Bloomberg Sterling Corps GBP | -0.3% | -0.3% | 0.7% | -14.0% | |
| WTI Oil GBP | 4.1% | -2.2% | -4.7% | 54.2% | |
| Dollar per Sterling | 0.8% | 0.5% | -2.4% | -11.7% | |
| Euro per Sterling | 0.2% | -0.5% | 1.2% | -0.9% | |
| MSCI PIMFA Income | -0.4% | -0.5% | 2.0% | -8.0% | |
| MSCI PIMFA Balanced | -0.5% | -0.6% | 2.4% | -8.0% | |
| MSCI PIMFA Growth | -0.6% | -0.6% | 3.0% | -7.2% | |
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World USD | 0.2% | -0.1% | 2.8% | -19.7% | |
| MSCI UK USD | 1.9% | 1.1% | 1.4% | -9.4% | |
| MSCI USA USD | -0.8% | -0.6% | 4.4% | -20.2% | |
| MSCI EMU USD | 1.8% | 1.9% | -1.3% | -26.0% | |
| MSCI AC Asia ex Japan USD | 1.9% | 0.0% | -0.7% | -17.6% | |
| MSCI Japan USD | 0.4% | -1.5% | 1.2% | -20.4% | |
| MSCI Emerging Markets USD | 1.9% | 0.0% | -1.7% | -19.0% | |
| Bloomberg Sterling Gilts USD | 0.9% | 0.7% | -0.1% | -24.6% | |
| Bloomberg Sterling Corps USD | 1.1% | 0.9% | -0.6% | -23.6% | |
| WTI Oil USD | 5.1% | -1.4% | -6.4% | 36.4% | |
| Dollar per Sterling | 0.8% | 0.5% | -2.4% | -11.7% | |
| Euro per Sterling | 0.2% | -0.5% | 1.2% | -0.9% | |
| MSCI PIMFA Income USD | 0.6% | 0.3% | 0.3% | -18.6% | |
| MSCI PIMFA Balanced USD | 0.5% | 0.2% | 0.7% | -18.6% | |
| MSCI PIMFA Growth USD | 0.5% | 0.1% | 1.2% | -17.9% | |
Bloomberg as at 18/07/2022. TR denotes Net Total Return
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Chloe
19/07/2022