23/07/2021
Strong reports from social media companies Snap (NYSE:SNAP) and Twitter provide a strong warmup act for Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL) next week. Coffee futures surge to a seven-year high on frost in Brazil. Stocks are set to open higher amid updates from American Express (NYSE:AXP), Honeywell (NASDAQ:HON) and NextEra Energy (NYSE:NEE). India's IPO market is taking off, and oil is steady at the end of a roller-coaster week. Here's what you need to know in financial markets on Friday, 23rd July.
1. Reopening boosts Snap and Twitter
The return to something nearer normal life in the second quarter propelled revenue growth at social media companies Snap and Twitter, pushing the stocks of both companies higher in after-hours trading on Thursday. The reports set an upbeat tone for media companies ahead of reports from Alphabet and Facebook next week.
Snap reported subscriber and revenue growth well ahead of expectations, with revenue doubling and cutting the company’s net loss by half to just over $150 million. CEO Evan Spiegel said that uploads to its TikTok rival service Spotlight had tripled, while daily average users of that service rose 49%.
Twitter, meanwhile, said revenue grew 74% on the year and swung back to profit in the second quarter, but warned that operating costs would rise more quickly over the second half than it had expected.
2. Caffeine rush
There’s a fresh twist in the ongoing debate over commodity price inflation. Coffee Futures had their biggest daily gain in six years and closed at their highest since 2014 after reports of frost damage to this year’s crop in Brazil.
Brazil is still by far the world’s largest source of coffee, producing more than the next two biggest producers (Vietnam and Colombia) combined.
The frost has exacerbated an already-existing shortage caused by drought and a lack of containers for transport. In the past, supply problems in Brazil have typically generated extreme but short-lived spikes in prices. At over $204, benchmark coffee futures have now risen some 59% this year, but they remain well below their highs in past spikes.
Elsewhere in the commodities markets, Tin Futures hit another record high in London.
3. Stocks set to open higher; GOP u-turn calms Covid-19 fears
U.S. stocks are set to end the week back at or near record highs, as futures extend their premarket gains on the back of Thursday’s after-hours earnings.
By 6:20 AM ET (1020 GMT), Dow Jones futures were up 151 points, or 0.4%, while S&P 500 futures were up in line and Nasdaq 100 futures were up a touch more, by 0.5%.
Fears about the spread of Covid-19 across the U.S. have lessened this week, after senior Republican politicians and some Fox News anchors have moderated their criticism of the country’s vaccination program - although it isn’t clear whether their change of heart has been wholly taken on board by supporters yet.
Honeywell, American Express and NextEra Energy lead the roster of early earnings updates, along with Kimberly-Clark (NYSE:KMB) and Schlumberger (NYSE:SLB). Elsewhere, Intel (NASDAQ:INTC) is likely to be in focus after a mixed update in which the high-margin data center business spoiled an otherwise strong report.
4. Zomato kicks off Indian IPO boom
India saw its first-ever blockbuster IPO of a fast-growing, loss-making startup.
Shares in food delivery group Zomato (BO:ZOMT) soared as much as 80% in Mumbai on their debut, giving it a valuation of $12 billion. Indian regulation has only recently changed to allow loss-making companies to go public, and local investors appeared more than ready to fund those losses in the near term.
The IPO was the largest in India this year, and is set to be followed by PayTM, backed by – among others – Jack Ma. PayTM’s deal may yet come to symbolize a shift in regional gravity for tech listings - away from Ma’s homeland of China, which thwarted his plans to take Ant Group public earlier this year.
5. Oil steady; rig data, CFTC numbers due
Crude oil prices are set to end a roller-coaster week roughly where they started it – above the key optical level of $70 a barrel – after riding out scares over both demand and the release of crude from China’s strategic reserve.
By 6:30 AM ET, U.S. crude futures were down 0.1% at $71.86 a barrel, while Brent crude futrues were down 0.1% at $73.72.
Schlumberger’s guidance later will provide an insight into whether the rally in prices over the last six months will translate into greater drilling activity in the U.S. Baker Hughes’ weekly rig count is also due later, as are the commitment of traders reports from the Commodity Futures Trading Commission.
