TEAM Asset Management’s global weekly market review for week commencing 24th April 2023. TEAM Asset Management is a Jersey-based independent asset management company of AIM-listed parent, TEAM plc (LON:TEAM).
There was some nervousness ahead of the quarterly corporate earnings reporting season on concerns squeezed household finances would impact profitability but thus far most companies have reported earnings that have exceeded expectations. The blue-chip S&P 500 and technology focussed Nasdaq indices gained 2.4% and 3.5% respectively last week.
Some of the biggest technology companies, including Alphabet, Amazon, Meta Platforms and Microsoft all reported last week and the results were strong across the board. Google’s parent, Alphabet, generated revenue of $68.9 billion in the first quarter, up 3% from the same period last year, boosted by a return to growth in its search advertising business. YouTube ad revenues slipped for a third consecutive quarter, but by less than expected, and the company took a $2.6 billion charge due to reductions in its workforce and office space.
Shares in Microsoft jumped more than 7% on Wednesday after it reported record revenue of $22.1 billion from its cloud computing unit, led by Azure. Overall revenue climbed 7% from the same period a year earlier to $52.9 billion.
The hype around Microsoft’s development of its AI technology through its partnership with OpenAI, the developer of ChatGPT, has helped to lift its shares by 27% so far this year and CEO Satya Nadella revealed the company is “having conversations we never had” with clients keen to leverage the new technology.
However, it wasn’t all good news for Microsoft as the UK Competition and Markets Authority announced it would block its proposed $75 billion takeover of Activision Blizzard on concerns its games could become exclusive to its own gaming platforms. EU regulators and expected to announce their decision later this month and the US Federal Trade Commission has already expressed concerns over the deal.
Shares in Meta Platforms, the parent of Facebook and Instagram, rose 14% on Thursday after it reported a return to sales growth, ending a run of three straight quarters of declines. Overall revenue increased to $28.6 billion during the first quarter and CEO Mark Zuckerberg revealed that investment into AI is already helping to improve engagement and the effectiveness of advertising on its platforms. AI-driven recommendations have increased time spent on Instagram by 24%.
Away from tech, earnings from banks and energy companies also impressed. Pre-tax profits at HSBC more than tripled to $12.9 billion during the first three months of the year on the back of higher interest rates – its net interest margin, the difference between the interest it receives from loans and pays on deposit, increased to 1.69%.
HSBC also booked a $1.5 billion gain from its acquisition of Silicon Valley Bank’s UK business for a pound and announced it will buy back up to $ 2 billion of shares this year.
Energy companies continued to generate bumper profits in the first quarter despite oil prices falling more than 50% from last year’s peak levels. BP reported underlying profits of $5 billion, versus $6.2 billion in the first quarter of 2022, underpinned by the very strong performance of its oil and gas trading teams. It left its dividend unchanged but will scale down its share buybacks to $1,75 billion from the $2.75 billion it previously announced.
Upbeat corporate earnings offset ongoing angst over inflation. UK government data revealed food and drink prices rose by almost 20% in the first quarter, the fastest pace since 1977, and the Reserve Bank of Australia surprised by raising interest rates by 0.25% to 3.85% on Tuesday. Consumer price inflation has eased to 7% in Australia but RBA governor Philip Lowe warned that it will take some time before it falls back to the its target range of 2% to 3%.
Author: Andrew Gillham, TEAM Asset Management, Senior Investment Manager, (andrewgillham@team.je)
