*Samsung and Alphabet Miss Forecast *Standard Charted Initiates Share Buyback *Chinese Caxin PMI data shows soft reading
European markets are trading lower after the disappointing German and French economic data. The German consumer climate number didn't show any improvement as compared to the previous reading of 10.4. In addition to this, the German import prices month/month also dropped to zero while the forecast was 0.3 percent.
The focus is on China, the Chinese economic engine has sputtered and the risk sentiment is impacted by this. The Chinese Caixin manufacturing PMI fell to 50.2 missing the forecast of 51. However, the bright side is that it is still in the positive territory. A number above 50 represents expansion and below 50 represents contraction.
Further pessimism in the market comes from earnings. Samsung, the world's biggest phone maker, was also unable to impress the markets. The Korean giant missed analysts forecast, the weakness was mostly in the screen display- this was due to the lower orders from Apple.
The share buy back story remains the dominant force among corporates, Standard Charted announced that it will buy back as much as 1,000,000,000 of shares. This is the first time in more than 2 decades that the bank will repurchase its shares and this comes after the bank reached a settlement with the US authorities over several different sanction breaches. Winter has been long for Standard Charted shareholders, the bank battled with its loan losses, penalties, and feeble returns.
For me, the key thing in Standard Chartered's earnings was the reduction in the operating expenses, it fell by 2% to $2.4 billion. Investors need to see healthy returns, and for this to happen, the bank needs to tighten its belt around its operational expenses and avoid penalties. The role of Standard Chartered Bank around “One Belt and One Road” is also of critical importance. The bank needs to make sure it plays the main role here given the scope.
Alphabet posted another disappointing quarter last night, the earnings result missed analyst estimates. The concerns are that the firm is losing its ad revenue to other digital rivals. As a result of this, the shares plunged by 7% yesterday and we are expecting the sell-off to continue today. The company reported sales of $29.5 Billion while Wall Street was looking for $30.04 Billion. The revenue grew by 15%, however, this was the slowest pace in growth going all the way to 2015. Alphabet needs to assure investors that the firm’s R&D lab has enough potential to combat the limited growth and surge in competition.
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