Weekly outlook: Apple reports as more rate hikes expected

Key events for UK wealth managers for the week starting 1 May

Chair Powell participates in the Federal Open Market Committee (FOMC) press conference on November 2, 2022.

Monday 1 May

  • – Chinese purchasing managers’ indices (PMIs) for manufacturing and services
  • – US Institute of Supply Management (ISM) purchasing managers’ index (PMI) for manufacturing
  • – In the US, quarterly results from Stryker, NXP Semiconductor, ON Semiconductor, MGM Resorts, Lattice Semiconductor, Avis Budget and Norwegian Cruise Lines

Tuesday 2 May

  • – Quarterly results from BP
  • – Quarterly results from HSBC 

Shares in global banking giant HSBC are up more than 15% over the last year, buoyed by their cheapness compared to US peers – in terms of book, or net asset, value – as well as the reopening of China and Hong Kong after three years of lockdowns.

AJ Bell’s Russ Mould and Danni Hewson highlighted some of the key indicators analysts will be looking for to measure the bank’s performance. The first is loan and deposit growth, which will reveal if the run on US and Swiss banks has prompted any deposit flight, or even driven money toward the global megabanks like HSBC.

Another key area is net interest margin, and whether whether competition from other banks, or higher returns on cash and money market funds, is at least partially offsetting the benefit of higher interest rates.

Hargreaves Lansdown’s head of money and markets Susannah Streeter argued the elevated net interest income is expected to deliver a spurt of profits to the bank, but said with the outlook for the global economy darkening, there may be an increase in defaults.

Streeter added: “HSBC set aside a hefty $3.6bn (£2.9bn) in preparation for more bad loans, so guidance will be watched closely for any indication that more provisions may be needed.”

Mould and Hewson concluded: “[These areas] will help to shape the headline pre-tax profit figure, where the consensus for the first quarter is $7.5bn (£6bn) compared to $4.2bn (£3.4bn) a year ago. For the whole of 2023, analysts expect $32.7bn (£26.2bn) compared to just over half that in 2022.”

  • – Interest rate decision from the Reserve Bank of Australia
  • – UK Nationwide house price index
  • – EU and UK purchasing managers’ indices (PMIs) for manufacturing
  • – EU flash inflation figures
  • – US Job Openings and Labor Turnover Survey (JOLTS)
  • – US factory orders
  • – US car sales
  • – In Japan, quarterly results from Japan Tobacco and Japan Airlines
  • – In Europe, quarterly results from UniCredit
  • – In the US, quarterly results from Pfizer, AMD, Starbucks, Eaton, Uber, Ford, Yum China, Clorox, Caesar’s Entertainment and Lyft

Wednesday 3 May

  • – Trading updates or quarterly results from Lloyds, Haleon, Barratt Developments, Flutter Entertainment, Coca-Cola HBC, OSB, TI Fluid Systems and Reach
  • – EU unemployment
  • – Interest rate decision from the Federal Reserve (Fed)

The Federal Reserve has hiked interest rates at the fastest rate in its history over the last 12 months according to Mould and Hewson, and the Fed is expected to hike by another 25 basis points this time around.

The Fed Funds rate has raced from 0.25%, a record low, to 5%, and chair Jerome Powell (pictured) and his colleagues have also sanctioned a switch to Quantitative Tightening (QT) from Quantitative Easing (QE).

Mould and Hewson said: “The central bank ceased its bond-buying programme and permitted its fixed-income holdings – and thus its balance sheet – to shrink at a rate of $95bn (£76bn) a month. The Fed’s balance sheet started to grow again when it provided additional liquidity in the wake of the collapse of Silicon Valley Bank, but it has since begun to shrink once more.”

The pair added: “The real issue then is what hints Powell drops as to future policy moves. Inflation may not be cooling as fast as it likes and labour markets remain tight, given how low unemployment is, but the US banking system has wobbled, and the central bank is now admitting that a recession is possible in 2023.

“This leaves the Fed with a tricky balancing act and markets currently believe this will be the last rate hike of this cycle. Indeed, markets are pricing in a first rate cut for November 2023.”

  • – US ADP monthly payrolls
  • – US purchasing managers’ index (PMI) for services
  • – US weekly oil inventories
  • – In Europe, quarterly results from Airbus, BNP Paribas, ENEL, Stellantis, Ørsted, Lufthansa, Pandora and Leonardo 
  • – In the US, quarterly results from Qualcomm, Estee Lauder, Kraft-Heinz, Yum Brands, Barrick Gold, Zillow and Qorvo

Thursday 4 May

  • – Interest rate decision from European Central Bank (ECB)

Mould and Hewson pointed out that the ECB were late to begin raising interest rates: “President Christine Lagarde and colleagues left the headline refinancing rate unchanged at zero until July 2022 and they have since taken it to 3.50% via a series of quick-fire hikes.”

The pair from AJ Bell added: “The consensus is that the central bank will take the refinancing rate to 3.75% at this meeting and then take it to 4% or even 4.25% before pausing.

“The ECB has also started to shrink its balance sheet. Last autumn it started to collect repayment of the cheap financing it had provided to European banks via the Targeted Longer-Term Refinancing Operations (or TLTROs) and in March it started QT at a rate of €15bn (£13.2bn) a month.

“That run rate of QT is due to run until June, at which point the ECB will reassess”, they concluded.

  • – Full-year results from Trainline
  • – First-half results from Aston Martin Lagonda and Virgin Money UK
  • – Trading statements or quarterly results from Shell, BAE Systems, Next, Hiscox, Endeavour Mining, Derwent London and IMI
  • – EU and UK purchasing managers’ index (PMI) for services
  • – UK mortgage approvals
  • – EU producer price (factory gate) inflation
  • – Challenger, Gray and Christmas job cuts survey
  • – US weekly unemployment claims
  • – In Asia, quarterly results from Budweiser APAC
  • – In Europe, quarterly results from Novo Nordisk, Anheuser Busch InBev, Equinor, Volkswagen, ArcelorMittal, BMW, Infineon, AP Møller-Maersk, CapGemini, Uniper, Moncler and Zalando
  • – In the US, quarterly results from Apple

Apple reveals its second-quarter results on Thursday and, following a 35% year-to-date rise, shares are back within 10% of their all-time high.

Mould and Hewson said this was remarkable in some ways given the dicey anecdotal evidence in the overall trading environment: Foxconn, Apple’s biggest mobile device contract manufacturer, has issued a profit warning, while TSMC, the world’s biggest contract silicon chip maker, has issued weak Q1 results and guided expectations lower for Q2.

In addition, Mould and Hewson highlighted that global smartphone shipments fell by 12% year-on-year in the first quarter of 2023.

However, Hargreaves Lansdown‘s Streeter said Apple appears to be bucking the trend – growing its deliveries by 3% instead, and China’s re-opening should provide resilience on two fronts; an end to the production issues that plagued the tech giant and a renewed appetite for gadgets among consumers freed from rolling lockdowns.

She added: “Keeping iPhone sales brisk is crucial for its Services arm to keep growing its services business and other highly lucrative products like AirPods. Guidance will be closely watched, particularly with American shoppers becoming more worried about the health of the US economy.

“Purse strings are set to be tightening and investors will want to find out to what extent this expected trend will take a bite out of Apple’s sales. The tech giant has immense brand power, but with a recession looming stateside and a global slowdown on the cards, even it won’t be completely immune.”

  • Quarterly results from ConocoPhillips, Zoetis, Moderna, Ferrari, AIG, DoorDash, Kellogg, Ball, Coinbase, News Corp and Cirrus Logic

Friday 5 May

  • – Trading updates or quarterly results from International Consolidated Airlines and InterContinental Hotels
  • – Japanese wage growth
  • – German factory orders
  • – UK purchasing managers’ index (PMI) for the construction industry
  • – EU retail sales
  • – US non-farm payrolls, unemployment and wage growth data
  • – In Australia, quarterly results from Macquarie
  • – In Europe, quarterly results from Intesa SanPaolo, Thales, Adidas and Siemens Gamesa Renewables
  • – In the US, quarterly results from Warner Bros Discovery and Formula One

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