Shares in Europe and the US fell again overnight as investors confronted macro and micro concerns. The exception was tech stocks, with the Nasdaq index one of the only gainers over the last 24 hours, helped by a US $35 billion bid for Xilinx. Bonds were the major beneficiary as they continued to bounce back from last week’s sell off.
Stock reporting around the globe is creating dilemmas for investors. As the season approaches the half way mark, earnings and sales are running slightly ahead of forecasts, but still reflect a grim corporate landscape. In the case of the S&P 500, sales are down 3% across the almost 200 reports so far, and earnings are down 11%.
The patchy nature of the reports makes the investment problem worse. Turnover and profits are increasing across the healthcare and technology sectors, while slumping in consumer goods and energy stocks.
However it is the exceptions that are doing the damage to portfolio values. German software giant SAP fell more than 20% after reporting a worse than forecast quarter and warning that further lockdowns will add to its problems. Despite its focus on technology, the deferral of corporate decisions by customers due to Covid uncertainty is weighing on SAP.
The challenge lies ahead for Australian bank investors. Three of the big four banks report their annual results over the coming week. All three have flagged significant one-off write downs, despite already substantial provisioning, and analysts may revise forecasts downwards once the details of these further woes are revealed.