Your bite-sized weekly update (22 Oct)

By Beansprout • 22 Oct 2022 • 0 min read

Netflix has more subscribers, Tesla disappoints and bond yields rise.

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THIS WEEK IN MARKETS

The results season is in full swing, as investors await to see how the weaker economic environment is impacting companies’ earnings and prospects. 

And so far, it hasn’t been too bad. 

Netflix has been the poster child of this resilience, when it added subscribers once again after several quarters of decline. (The success of the hit series Extraordinary Attorney Woo probably helped here.) 

According to Refinitiv, 75% of companies in the S&P500 index that have reported so far managed to beat earnings expectations. This is higher than the long-term average of 66%. 

However, earnings growth estimates for 2022 and 2023 have been lowered as the outlook continues to dim. 

For one, Tesla disappointed on its sales, driving concerns about slowing demand in China. 

The upcoming week is shaping up to be another big earnings week, with Apple, Amazon, Alphabet, Meta and Microsoft all due to report their earnings. 

Closer to home, we will also start to see the S-REITs starting to report their earnings, just as the STI fell below the 3,000 level.  

There’ll also be an auction for the Singapore 6-month T-bill, where there’s rising investor expectations that the yield could rise above 4% per annum. 

IMPORTANT

Stock market update
Source: Bloomberg. Price as of market close on 22 Oct

 

  • Fed pivot? US Federal Reserve (Fed) official Mary Daly said that the Fed should avoid raising interest rates too sharply and putting the economy into an “unforced downturn”. She also indicated that it might be time to start talking about slowing down the pace of interest rate hikes. 

  • Hot seat. UK Prime Minister Liz Truss resigned following a failed budget involving tax cuts that unsettled financial markets. The election to determine who will become the next leader of the Conservative Party and Prime Minister is expected to be completed by 28 October. 

  • No change. China President Xi Jinping signalled no change in its focus on zero Covid and common prosperity at the Communist Party Congress, disappointing investors looking for a reversal of policies and a pickup in economic growth.  Read our analysis here.

ICYMI

  • Tesla (TSLA) reported lower-than-expected quarterly revenue and cut its full-year delivery target. 

  • Netflix (NFLX) added 2.4 million net subscribers in the third quarter, reversing a decline in previous quarters and exceeding its previous guidance of 1 million. It further expects to add 4.5 million subscribers in the fourth quarter. 
  • Snap (SNAP) guided that the company will not see any revenue growth this quarter due to a slowdown in the digital advertising market. Its peers Meta Platforms (META), Alphabet (GOOGL) and Twitter (TWTR) reacted negatively to the earnings report. 
  • Bank of America (BAC) reported earnings above expectations as its net interest income rose to the highest level in at least a decade as the lender benefited from interest rate hikes. 

  • Credit Suisse is exploring selling its US asset-management operations and is moving closer to securing financing for other businesses as part of its strategy review to be announced later this month, according to a Bloomberg report. 

  • GoTo Group is in talks with its major shareholders for a sale of roughly $1 billion of their stakes to avoid a share price decline when a lock-up on their holdings ends next month, according to a Bloomberg report.

  • AEM Holdings raised its revenue guidance for the full year ending Dec 31 to between S$820 million and S$850 million.

Source: Bloomberg, CNBC, Business Times, Edge Singapore

THE BIG IMPORTANT STORY

6-month T-bill interest rate rising above 4%? Here’s what the charts are showing us.

The cut-off yield on the 6-month T-bill surged to 3.77% per annum in the last auction on 13 October. As bond yields continue to rise, could the yield rise to above 4% in the upcoming auction?

T-bill auction 27 Oct
 

WHAT’S UP THIS WEEK

Monday, 24 Oct

  •  SG: Market Holiday

Tuesday, 25 Oct 

  • US: Coca-Cola, General Motors, Alphabet, Microsoft, Visa earnings
  • SG: Mapletree Logistics Trust earnings

Wednesday, 26 Oct 

  • US: Boeing, Meta earnings
  • SG: Frasers Centrepoint Trust, Mapletree Industrial Trust earnings

Thursday, 27 Oct 

  • US: Apple, Amazon, Shopify, Mastercard earnings 
  • US: GDP data
  • SG: 6-month T-bill auction
  • SG: Mapletree Pan Asia Commercial Trust earnings 

Friday, 28 Oct 

  • SG: Capitaland Ascott Trust, CDL Hospitality Trust earnings 

THAT’S INTERESTING

  • Lettuce can last longer. An iceberg lettuce in a blond wig has outlasted Liz Truss, after Britain’s shorting serving prime minister resigned 44 days after starting the job. Earlier, the Daily Star had set up a webcam in a competition to see if the lettuce would have a longer shelf-life than the prime minister. As Truss made her resignation statement, the number of viewers watching the video on Youtube soared to above 20,000. (Source: The Guardian) 

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