- US stocks declined sharply yesterday with the S&P 500 falling by 2.8%. The Technology heavy Nasdaq index underperformed, falling by 4.0%.
- A combination of factors are reported to have led the recent weakness in equity prices, including the expectation of aggressive tightening by the Fed, inflation and the restrictions that are being implemented in China in response to rising Covid-19 cases.
- US housing data, which was released yesterday afternoon, showed that house prices increased by 19.8% y/y in February. However, the number of new home sales declined by nearly 9% m/m in March. The recent rise in mortgage rates is being cited as a key cause of the drop.
- European equities also dropped yesterday with the Euro Stoxx 50 falling by 1%. The market has opened flat this morning.
- European gas prices jumped by 24% this morning after Russia halted flows to Poland and Bulgaria. Russian President Vladimir Putin is demanding payment in rubles.
- Markets across Asia were mixed overnight. Onshore Chinese equities outperformed with the Shanghai index rising by 2.5%.
The US software giant reported better than expected quarterly results after the market close last night. Revenue for the quarter ended March 2022 was $49.4bn, increasing 18% y/y. Importantly, Azure, and other cloud services revenue jumped 46% y/y. Free cash flow was $20bn, up 17% on the prior year period. Management guidance on forward growth appears well received and is likely to result in modest upgrades to 2023 forecasts. CEO Satya Nadella commented that “going forward, digital technology will be the key input that powers the world’s economic output”. Microsoft is a holding across the Goodbody Dividend Income (GDI) Fund suite and the Goodbody Global Leaders Fund. The stock traded up 4.5% in after hours on the back of the update.
Visa reported strong quarterly numbers overnight as the global economic recovery that began in the middle of last year continued. Overall revenues grew 25% and earnings grew 30% y/y. Cross-border revenues, which were significantly affected by the lack of consumer travel as a result of Covid, continue to rebuild momentum. This revenue stream, on which Visa earns a much higher fee than domestic transactions, grew 48% y/y. Given Visa’s fee-based revenue model on consumer spending, their business is as close to a perfect inflation hedge as there exists in the public market. Visa shares, which we have held in our Global Leaders Fund since 2016, are trading 3% higher overnight.
Source; Goodbody Asset Management