Morning Report – Friday 1st May

Main Headlines

Amazon’s sales are racking up but they are not making much money — and isn’t expecting to. The e-commerce giant’s profit shrank and it predicted a possible loss in the current quarter as it spends to keep operations running smoothly. Jeff Bezos said the company expects to make $4 billion during the current period, and spend all of it — and maybe more. Shares plunged 4.8% post-market.

Sobering news from Amazon and Apple weighed on equity markets in Asia, with Sydney’s benchmark tumbling more than 3%. S&P 500 futures drifted lower after the underlying gauge finished April with its biggest monthly gain in 33 years, and FTSE 100 futures also fell. Markets were shut for a holiday in much of Asia. Oil continued to claw its way higher, Treasury yields ticked lower. Gold was steady.

GBP

Boris Johnson said Britain is past the peak of the outbreak, and he promised to set out details next week for reopening. Sterling got a lift from the ECB’s slightly dovish hold but recent pound strength potentially faces challenges in the new month. There are lingering uncertainties about Brexit and the BoE meets on May 7, and is likely to follow the ECB and Fed’s lead holding rates steady, waiting to see if already proffered aid and stimulus helps stabilise the UK economy. However, there is a risk that the BoE will be dovish owing to the high degree of virus-related economic uncertainty prevalent in the UK.

EUR

The ECB held the key deposit rate steady yesterday but lowered the TLTRO III rate which was seen as slightly weak considering the current climate. The European Central Bank now expects the euro area economy to contract by a staggering 5-12% in 2020. As the scale of the challenge has increased, President Christine Lagarde reiterated the Governing Council is ready to flex its emergency asset purchase program to keep spreads tight. Even so, the sharp deterioration in economic and fiscal prospects means it is likely the program will have to be expanded.

USD

Donald Trump continued to blame China for the pandemic and threatened to use tariffs to retaliate, though he didn’t say why he believes the virus came from a Wuhan lab. Economic adviser Larry Kudlow denied on CNBC that cancelling some of America’s debt obligations to China has been discussed. The president may block a government retirement fund from investing in Chinese firms seen posing a national security risk.

Main Economic Data/Central Banks/Government (All Times BST)

• 7:00 a.m.: U.K. April Nationwide House Prices
• 9:30 a.m.: U.K. March Mortgage Approvals, April Manufacturing PMI
• 2:45 p.m.: U.S. April Manufacturing PMI
• Labor Day/May Day celebrated in countries globally
• OPEC+ supply cuts scheduled to take effect
• U.S. Total Vehicle Sales

Corporate Highlights

Apple eked out quarterly sales growth, and CEO Tim Cook said the company saw a “pickup” in the second half of April after a “very depressed” period in late March — but the company didn’t provide a forecast for the first time in more than a decade.

Visa’s adjusted quarterly EPS of $1.39 beat the $1.35 estimate.

Amgen’s first-quarter revenue increased 11% year-over year to $6.2 billion.

Gilead sees “significant uncertainty” in how the pandemic will affect its business, even as its drug appears headed for swift authorization.

United aims to cap its daily cash burn rate at no more than $45 million. Its loss was narrower than consensus.

Allianz withdrew its 2020 profit target.