World Stocks Focus On Earnings, Strong Dollar
We are in the midst of a host of earnings from big-name tech companies, the highlight of which today is probably Apple’s ($AAPL) results for its fiscal third quarter.
Tuesday, July 21, 2015 - 00:00
Those are set to be released after the US stock market closes this afternoon, and investors will be looking for clues as to the performance of its new Apple watch, but the main story will be, as ever, how the flagship iPhone fared.
China has become of crucial importance to Apple in the last year or so, finally outstripping the US to become the company’s largest market for the iPhone earlier this year, but a reliance on Chinese sales could prove to be a risk now that the Chinese economy is showing signs of slowing. Also reporting after the market are Microsoft ($MSFT) and Yahoo ($YHOO). Microsoft has historically relied on sales of its flagship Windows operating system, but the company has decided on a major change in its business model with the forthcoming Windows 10, intending to give the OS away free to existing Windows 7 and 8 users. With that in mind, it will be interesting to see whether sales in the reporting period have been hindered by those putting off upgrading in anticipation of the new, free version.
Earnings so far have been fairly upbeat, though there appears to be a slightly disturbing, and not unfamiliar, trend of companies beating analyst expectations with earnings but narrowly missing on the revenue front. IBM conformed to that trend with its results released post-market on Monday, as did fellow Dow-component Verizon when it reported early on Tuesday. Shares in IBM plunged 4.2%, while Verizon dropped 1.7% in early trading.
IBM is a highly-weighted component of the Dow Jones and the big drop in Big Blue has had a significant drag on the index, pulling it beneath the key psychological level of 18,000. Shortly after the opening on Wall Street, the Dow Jones was down 121 points or 0.67% at 17,979, while the broader measure of the S&P 500 Index sunk just 0.06% to 2126.9.
One of the problems facing large multi-nationals like Apple, IBM and Microsoft is the current strength of the dollar, which has a negative effect when reporting overseas revenue in their domestic currency. The dollar has slipped back a little today, but remains close to three-month highs. The dollar index, a measure of the US dollar’s strength against a basket of six leading currencies, has advanced 5% in the past month. EUR/USD rose 0.47% to 1.0876 after the IMF confirmed late yesterday that Greece has cleared its overdue loan repayments and is therefore no longer in arrears.
The fall in the US dollar has helped the price of oil recover: US crude oil futures were up 1.3% to $51.06 a barrel in morning trading in New York.
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