- European banking sector is also an area of interest
- Alphabet shows a moderate slowdown in spending
- People Bank Of China would have to act to ignite the growth in China
US futures and European markets are under the influence of the earnings season. Today, it is all about Alphabet; Google is the king of the advertisement and its ad business is in full throttle. The message is clear for its investors that the company is a monster in this arena and the EU regulatory backlash hasn’t been able to damage its number in any significant way.
The internet giant reported its earning number last night and it smashed all the estimates. The crown jewel, its ads business experienced growth of 24% and its second most important lucrative business; cloud services also added a strong number. The growth in the cloud services was 37%.
When we look at the Alphabet’s earning, it makes us comfortable that there is a moderate slowdown in spending. This means that the user acquisition cost is going down. This creates a more efficient environment for revenue growth. Having said this, the company cannot afford to have reputation damage and it still needs to bring fines under-control because eventually this would add go against the Google’s values.
European banking sector is also an area of interest for investors today. Last week, we have seen some serious inflow in the iShares MSCI European Financial ETF. Investors poured a record $345 million. This is mainly on the back of the good performance from the US banks which lead them to believe that the European banks would echo the same message. European banks have the healthy balance sheet and the economic growth in the region should add value to their headline numbers.
UBS reported it’s earning earlier today and it has pleased its shareholders for the second consecutive quarter by beating expectations. It reported a pre-tax profit of 569 million francs while the average estimate was for 397 million francs. However, the number for the global wealth management pre-tax profit came in at 1.04 billion francs, a little below the forecast. Another area of concern was the outflow of funds, astonishing 9 billion francs in Americas. A number of this scale threaten the company growth equation and the bank needs to pay attention to this if it wants to attract its wealthy clients.
Over in Asia, we have seen most of the markets green as the speculation picked up further popularity. Investors are of the mind frame that the People Bank Of China would have to act to ignite the growth fire in China once again. One way of doing that would be to increase the stimulus package and this could just do the trick to fade the effects of the trade war on the Chinese economy.
Back in the currency market, the euro is struggling to hold ground against the mighty dollar. The European Central Bank would be making its decision on its monetary policy on Thursday. Many in the market are expecting the bank to stick to its plan and end of the QE program. Over the years, the economic data has provided many clues for the ECB to make its decision on the monetary policy.
The Euro-area composite PMI numbers are due later today. The data has seen improvement during June and this was the first upbeat reading since this year. The forecast for the flash service PMI is for 55 and for manufacturing is 54.7
