Analysts at AJ Bell have their eyes on three news items that could move the stock market this week.
HSBC first quarter
We’ve had some banking scares from the US in recent weeks. But investment director Russ Mould, and head of financial analysis Danni Hewson, highlight the strength of HSBC Holdings.
They point out that the US banks involved, and Switzerland’s Credit Suisse, were badly run. They were weakly regulated compared to UK-listed banks like HSBC, and took on too much risk.
HSBC, meanwhile, looks set to benefit from the opening up of markets in China and Hong Kong. By far the biggest chunk of HSBC’s profit comes from that region. And that keeps it largely isolated from what happens in the UK.
What should we look for when we get Q1 figures on 2 May? Loan and deposit levels could be crucial. And net interest margins could be a major factor right now.
Along with a few other key signs, we should also keep our eyes peeled for any rises in impairments.
The consensus suggests a pre-tax profit of $7.5bn for the quarter, well ahead of last year’s $4.2bn.
Interest rates
Markets are super sensitive to interest rates right now. We won’t have the next announcement from the Bank of England (BoE) until 11 May, though.
But we do have the latest decision from the US Federal Reserve on 3 May, followed by the European Central Bank (ECB) on 4 May.
The Fed has lifted its rate from an all-time low of 0.25% to 5% over the past year. The BoE’s rate stands at a slightly less painful 4.25% right now, so they might well tighten the screws some more.
The Fed is also moving to Quantitative Tightening to contract the money supply. And that sounds a lot less fun than Quantitative Easing.
Analysts currently expect the ECB to continue to crank up its rates, perhaps as high as the UK’s 4.25%. It’s currently at a refinancing rate of 3.5%.
Apple earnings
Investors around the globe keenly await earnings releases from Apple. And it’s second quarter time on 4 May.
It comes at a time when Apple stock is within 10% of its all-time high, after a volatile 12 months.
A number of US tech companies have issued profit warnings, or posted weak results. So what might that mean for Apple?
Hewson and Mould say:
On the face of it, a profit warning cannot be dismissed out of hand, although Apple is adept at managing costs, and it still has the powerful revenue streams from wearables, accessories and services on its side (all of which are very high margin)
But analyst expectations are fairly modest, so there might not be too much room for disappointment.
And AJ Bell’s experts point out that Apple is one of the stock market’s top cash cows, with operating free cash flow of $30.7bn in the first quarter.
The company has returned a staggering $689bn in dividends and share buybacks since its first return in 2012.
