A somewhat jittery start to trade today has seen the DAX outperform the vast majority of Europe, with the FTSE 100 and CAC rolling over. Sharp decline seen for the AUD and NZD highlight concerns over the trajectory of growth in China, with the FTSE 100 continuing that theme as mining names Anglo American, Rio Tinto, and Glencore lead the declines. From a European perspective, we are looking at a relatively serene session in terms of data, although we have heard from ECB vice-president Luis de Guindos who noted that their new September projections are the “most important” factor that will determine whether the bank cuts rates in September.
Today puts corporate earnings front and centre for investors, with a raft of releases providing a wide array of information over the health of corporate America. Before the open we hear from the likes of Coca-Cola, Danaher, GE Aerospace, Phillip Morris, and Comcast. However, the big fireworks are released after the US close, with Alphabet and Tesla providing the first two Mag7 earnings reports of this earnings season.
The jitters and talk of rotation seen in the lead up to today highlights the valuation concerns that rear their head each time we see the big tech names report. As such, Alphabet earnings will provide the canary in the coalmine as we seek to gauge the fate of fellow tech giants and AI-related businesses over the second quarter. With the past week seeing declines throughout the tech sector, there is a strong case for a sharp rebound across the board should Alphabet earnings blast past estimates once again.
Meanwhile, Tesla has already enjoyed a 27% bump in their share price this month, with the stronger-than-expected deliveries figure raising hope for a company that has been struggling of late. There is an expectation that this quarter will mark a bottom for earnings, while disclosures over the AI and Robotaxi developments should help lift the mood somewhat. Nonetheless, coming into an earnings report off the back of such a sharp share price revaluation does raise concerns that the company needs to do much more to justify any further gains.
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