- Global markets tumble – US, Asia, and the UK all losing ground
- Apple gets the job done, focus shifts to later in the year
- Amazon ramps up AI spend – stock down 7%
- Oil on track for fourth consecutive weekly decline
- British Airways owner IAG continues to see strong demand
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“UK markets have opened lower as risk-off sentiment runs riot. Two key bits of data sent jitters through US markets that reverberated around the globe: US weekly unemployment claims rose to an almost one-year high, and manufacturing was weak. There are now concerns that the soft-landing scenario priced in for most of the year could be a pipe dream, and the Federal Reserve might have missed its chance to prevent an economic slowdown by not acting on rates earlier in the week. US jobs are out today, and further weakness here will simply exacerbate the current sell-off. Bad news is back to being simply bad news.
US futures have fallen even further, as tech earnings after the bell failed to light a spark. For Apple, this was another case of a good quarter being punished by high expectations. Results were good, and the stock now trades about flat. But this was always going to be a transition quarter for Apple: get the basics done and move on. What investors are really looking at is the latter part of the year and into 2025/2026, when Apple Intelligence should spark a major upgrade cycle.
Amazon still sits just shy of 7% down after disappointing last night. Once again, the numbers were pretty good. AWS did its job, with sales up 19%, ahead of expectations, helping to quell any fears that the resurgence in growth from the cloud business may be short-lived. But it was the guidance that spooked markets. AI spending is set to ramp up, and the impact on the profit line is starting to make its way into guidance.
Investors and analysts sometimes pay far too much attention to small quarterly shifts, missing the bigger picture. The reality is that these juggernauts are playing a different game, one with a much longer-term horizon, that’s more about retaining a dominant position over the next decade than worrying about the next quarter. One thing is for sure: all the AI spend must be going somewhere. The elephant in the room is Nvidia, who report later in the month. It wouldn’t be surprising to see another massive revenue number as the mega-cap cohort ramps up orders for the best tech on the market.
Brent oil futures are down yet again, trading around $80 per barrel and on track for its fourth consecutive weekly decline. Weak US economic data is fuelling concerns that demand may shrivel up. Rate cuts may be on the cards, which will help provide support for oil prices, but there’s a worry creeping in that they may be too late.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“British Airways owner IAG has pulled out of plans to acquire Air Europa following regulatory concerns, saying that going ahead wouldn’t be in the best interest of shareholders. IAG will keep hold of its current 20% stake in Air Europa but will have to fork over €50mn for backtracking on the deal. But on the flip side, that frees up cash to return to shareholders, meaning dividends are back, starting with an interim dividend of €0.03 per share. Back to business, IAG’s second-quarter revenue was broadly in line, while operating profits landed an impressive 12% ahead of market expectations. Capacity is expected to rise around 7% this year alongside significant increases in free cash flows as IAG continues to see strong demand for travel.”
