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Today's big stories

Investors are braced for big tech’s quarterly updates, which look set to influence the direction of the stock market’s recovery
Our analysts look into just how damaging a potential European "credit crunch" could be for global investors – Read Now
Deutsche Bank announced its first quarter was much better than analysts predicted

1/3

The Main Event

What’s Going On Here?

Roll up, roll up, ladies and gentlemen: companies representing a third of the US stock market’s value will tell investors this week how they performed last quarter – but it’ll be tech firms taking center stage.

What Does This Mean?

Investors are expecting US companies’ first-quarter revenues to be much the same on average as they were last year, and profits to be 7% lower. And while coronavirus is behind a lot of the decline, it’s also responsible for some industries performing better than the rest: namely tech, which – alongside healthcare and consumer staples – is expected to report rising quarterly profits.

Last week, investors heard that Netflix scored an expectation-busting 16 million new subscribers as folks stayed home. That same tailwind will probably help Amazon and Microsoft, whose respective retail business and productivity businesses have benefited from an increase in online shopping and remote working. And while Facebook and Google-parent Alphabet will be hurt by less advertising, some analysts still think they’ll end up earning more than they did last year.

Why Should I Care?

For you personally: You can run, but you can’t hide.
Weighing in at over 20% of the US stock market – which in turn represents about half the global stock market – tech stocks have the potential to significantly influence its overall direction and, no matter where you’re based, your investments. So even the most passive investors among you with cash sitting in a robo-advisor or pension pot might find your investments’ values affected by tech earnings this week.

For markets: Heavy is the head.
A recent Goldman Sachs report noted that the biggest five companies (four of which are tech) now represent a larger share of the US stock market than ever in recent history (tweet this). That suggests the stock market’s recent recovery hasn’t actually been driven by as many companies as you’d expect after a dramatic selloff like the one in March – and that tech stocks may single-handedly be propping things up.

Get prepared: A crash course on Facebook, Amazon, Apple, Netflix, Microsoft, and Google-parent Alphabet.

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2/3 Premium

Under Pressure

A key early indicator of stress in the European banking system has hit its highest level in eight years, leading to concerns a “credit crunch” could be coming later this year.

Get the full story in the Finimize app

🎢 Sit back and enjoy the ride

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3/3

Close Encounters

What’s Going On Here?

In what might be a once-in-a-blue-moon moment, Deutsche Bank announced a better-than-expected first quarter late on Sunday – and its stock rose 10% on Monday.

What Does This Mean?

Germany’s biggest bank has been struggling for a while, even after switching CEOs in 2018: it hasn’t had much success so far in ditching risky investment banking activities for more stable commercial banking, it’s been embroiled in a variety of money laundering scandals, and last year, it announced plans to fire one-fifth of staff and sell off parts of its business to rivals. Suffice to say analysts were pessimistic about the bank’s prospects.

That might be why investors were surprised to hear Deutsche’s revenue was up last quarter, and that its profit had beaten their expectations of a loss. The bank – like its peers – probably had its trading business to thank for that. Investors still have reason to be skeptical, mind you: Deutsche put more than $500 million aside in case of future loan losses, and warned it might keep less cash on hand than it’d promised this year.

Why Should I Care?

For markets: Germany wins the day.
With Germany emerging from coronavirus lockdown, investors in the country’s stocks might be starting to loosen up a bit too. Commerzbank’s share price rose 4% following Deutsche Bank’s news – the rival's now more likely to report better-than-expected earnings in its own update – while industrial giant Bayer’s rose 5% after it reported a stronger-than-expected quarter and unchanged annual forecasts.

The bigger picture: Honey, I shrunk the earnings.
Analysts, on average, think European companies’ 2020 earnings will be 17% lower than a year ago, but Morgan Stanley thinks it could be worse: the bank’s company analysts think earnings will fall 25% this year, while its “top-down strategists” reckon it could be as bad as 45%. Both sets of analysts are more optimistic for 2021, forecasting 21% and 40% earnings growth next year respectively.

Explained: Why, if company profits fall, their stocks might rise anyway.

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🙋 Ask a question

💬 Quote of the day

“Courage is not the absence of fear, but rather the judgement that something else is more important than fear.”

– Ambrose Redmoon (a beatnik, hippie, writer, and former music manager)

Tweet this

🤔 Q&A · RE: Winner Takes All

“Beyond share buybacks and dividends, what else can companies do with their excess cash?”

– Rick in Oklahoma, USA

“While the specific possibilities are endless, Rick, companies’ use of cash – a.k.a. ‘capital allocation’ – tends to fall into three categories. The first, as you rightly said, is shareholder returns via share buybacks and dividends. The second is capital expenditure – a.k.a. ‘capex’ – which usually involves big investments into physical assets like plants, property, and equipment that’ll benefit the company for years to come. The third is the purchase of another firm (in what’s often described as ‘inorganic growth’), which might provide a boost to earnings growth, access to new products or customers, or economies of scale.”

🙋 Ask a question

📚 Trade, trade, trade with RJO Futures

With investors chopping and changing their portfolios in response to the outbreak, there’s been a whole lot of trading going on lately. And if you’re one of the people looking to make the most of – or at least not lose out from – all the volatility, RJO Futures have your back.

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🌍 Finimize Community

👜 Look fashionable, Vogue’s coming

You heard that right: George Arnett of Vogue Business is coming to a Zoom near you to give his take on luxury retail stocks. So if ever there was an excuse to change the sweatpants we’ve all been wearing for three weeks, it’s probably this.

🌍 Global: COVID-19’s Impact on Retail & Luxury – 6pm UK time, April 29th
🇺🇸 USA: Your Money During a Pandemic – 6pm EST, April 30th
🇮🇳 India: Surviving the Pandemic as a Startup – 5pm IST, May 30th

📚 What we're reading

What are global superstars doing in Amish country? (Esquire)
The curious case of the missing art dealer (GQ)
Not all Guitar Heroes wear capes (Wired)

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Finimize - 🤖 Big tech saves stocks

Today's big stories

The Main Event

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Under Pressure

🎢 Sit back and enjoy the ride

Close Encounters

What’s Going On Here?

What Does This Mean?

Why Should I Care?

📚 Trade, trade, trade with RJO Futures

👜 Look fashionable, Vogue’s coming

Older messages

😨 JC Penney’s bankruptcy nightmare

💪 Blackstone: what coronavirus?

💪 Roche takes on coronavirus

📺 Everyone. Watches. Netflix.

🚗 Oil crushes Tesla

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