ETX Capital Daily Market Bite, 24th April 2014: European Markets Advance On Good Corp News
April 24, 2014 7:56 am
There’s much to cheer about on Thursday — US earnings on the whole are pleasing so far; Facebook and Apple both put a smile on markets face overnight with quarterly numbers which will perhaps go some way in justifying those silly P/E ratios both are sitting on. Mega week for deal activity so far; pharma deals with Novartis and GlaxoSmithKline earlier this week as well as reports of AstraZeneca being hit on by Pfizer.
Overnight, reports that French industrial manufacturer Alstom was being eyed up by US bellwether General Electric in a deal worth $13billion. Alstom came out this morning with a statement suggesting that it doesn’t know about any offer but hasn’t exactly flat out denied it which will keep the bid chatter propping up the French company’s shares today. Alstom currently up 12%.
For GE, it would be the biggest acquisition in its history and makes complete strategic sense. GE is basically in every one of Alstom’s businesses plus more and purchased the French company’s power unit back in the 90s. GE is currently in a strategic process to diversify the group further while Alstom is repairing its balance sheet to dispose of more non-core businesses. If GE manages to charm Alstom into its arms, the deal would be worth 5% of the US giant’s market cap — expect GE shares to jump at the Wall Street open later.
Briefly on tech titans Facebook and Apple –after-market shares for both companies jumped after much better than expected earnings. Facebook’s mobile business was the standout performer, pleasing market participants who were once unsure how FB will monitize itself appropriately. Clearly, mobile advertising is where the real growth is for the company who reported a 59% jump in the period as monthly active mobile users passed 1biilion. Facebook beat on other metrics too; revenues were better while EPS doubled — no wonder Zuckerberg was happy to splash out on big money purchases of WhatsApp and Oculus VR.
Meanwhile, Apple please the market with better than expected iPhone sales, particularly in China which represented a 17% jump in total unit sales. Following three or so quarters of underwhelming iPhone sales, the market was fearful the tech giant will again disappoint but that was not the case. Additionally, the company is returning more than $30billion to shareholders in its capital return programme whilst increasing the dividend. Furthermore, the product pipeline brings further cheer — iPhone6 is expected this year as well as a reported ‘phablet’ and a potential iWatch.
In European markets, stock indices advance with the FTSE100 up 31 points, the DAX higher by 40 points and the EuroStoxx50 up 14 points. Ukraine tensions increase; US troops have landed in Poland for a military exercise with more soldiers expected in forthcoming days. This follows days of violent incidents between pro-Russian rebels and Ukrainian forces. The US is warning of further sanctions but this military exercise is suggesting the West is preparing for military action if Russia fails to destabilise the tensions in the Ukraine.
On economic news in Europe so far; we have the German ifo survey out shortly which is expected to show a modest decline in April. French business confidence edged lower in April, confirming that weak domestic demand and political uncertainties continue to effect confidence. That said, markets are putting the macros aside and focussing on the wealth of corporate news out Thursday.
Brewer Heineken topped sales estimates, food and beverage giant Unilever delivered impressive numbers in the face of EM volatility and Novartis reported respectable profit of 22% whilst undergoing a huge restructure which resulted in its latest deals with Glaxo. Looking ahead, another raft of high profile US earnings from Caterpillar, Coca-Cola, GM, Verizon and UPS will steal the spotlight. Data-wise, look out for US durable goods and weekly jobless claims.
There’s much to cheer about on Thursday — US earnings on the whole are pleasing so far; Facebook and Apple both put a smile on markets face overnight with quarterly numbers which will perhaps go some way in justifying those silly P/E ratios both are sitting on. Mega week for deal activity so far; pharma deals with Novartis and GlaxoSmithKline earlier this week as well as reports of AstraZeneca being hit on by Pfizer.
Overnight, reports that French industrial manufacturer Alstom was being eyed up by US bellwether General Electric in a deal worth $13billion. Alstom came out this morning with a statement suggesting that it doesn’t know about any offer but hasn’t exactly flat out denied it which will keep the bid chatter propping up the French company’s shares today. Alstom currently up 12%.
For GE, it would be the biggest acquisition in its history and makes complete strategic sense. GE is basically in every one of Alstom’s businesses plus more and purchased the French company’s power unit back in the 90s. GE is currently in a strategic process to diversify the group further while Alstom is repairing its balance sheet to dispose of more non-core businesses. If GE manages to charm Alstom into its arms, the deal would be worth 5% of the US giant’s market cap — expect GE shares to jump at the Wall Street open later.
Briefly on tech titans Facebook and Apple –after-market shares for both companies jumped after much better than expected earnings. Facebook’s mobile business was the standout performer, pleasing market participants who were once unsure how FB will monitize itself appropriately. Clearly, mobile advertising is where the real growth is for the company who reported a 59% jump in the period as monthly active mobile users passed 1biilion. Facebook beat on other metrics too; revenues were better while EPS doubled — no wonder Zuckerberg was happy to splash out on big money purchases of WhatsApp and Oculus VR.
Meanwhile, Apple please the market with better than expected iPhone sales, particularly in China which represented a 17% jump in total unit sales. Following three or so quarters of underwhelming iPhone sales, the market was fearful the tech giant will again disappoint but that was not the case. Additionally, the company is returning more than $30billion to shareholders in its capital return programme whilst increasing the dividend. Furthermore, the product pipeline brings further cheer — iPhone6 is expected this year as well as a reported ‘phablet’ and a potential iWatch.
In European markets, stock indices advance with the FTSE100 up 31 points, the DAX higher by 40 points and the EuroStoxx50 up 14 points. Ukraine tensions increase; US troops have landed in Poland for a military exercise with more soldiers expected in forthcoming days. This follows days of violent incidents between pro-Russian rebels and Ukrainian forces. The US is warning of further sanctions but this military exercise is suggesting the West is preparing for military action if Russia fails to destabilise the tensions in the Ukraine.
On economic news in Europe so far; we have the German ifo survey out shortly which is expected to show a modest decline in April. French business confidence edged lower in April, confirming that weak domestic demand and political uncertainties continue to effect confidence. That said, markets are putting the macros aside and focussing on the wealth of corporate news out Thursday.
Brewer Heineken topped sales estimates, food and beverage giant Unilever delivered impressive numbers in the face of EM volatility and Novartis reported respectable profit of 22% whilst undergoing a huge restructure which resulted in its latest deals with Glaxo. Looking ahead, another raft of high profile US earnings from Caterpillar, Coca-Cola, GM, Verizon and UPS will steal the spotlight. Data-wise, look out for US durable goods and weekly jobless claims.
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Ishaq Siddiqi
Market Strategist
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