US index futures are trading lower this morning following disappointing earnings from Google’s parent company Alphabet, whose share price tumbled 7% in after-hours trading.

Revenue came in at US$29.5 billion, falling short of the consensus forecast of US$30 billion due to intensified competition in the online advertising segment.

Google’s advertisement revenue registered a slower pace of growth at 15%, compared to the 26% growth achieved by its rival Facebook in their latest announcement. The number of paid clicks on Google ads are also growing at the slowest pace seen in three years at only 39%, and cost per click has fallen 19%. The gradual shift of end users' habitats from computer and tablets to mobile devices is decelerating Google’s ad revenue growth.

Alphabet is currently trading at 31.1 times trailing P/E and 27.9 times forward P/E. Bloomberg analysts’ target price is still at US$1,345, inferring some 12% upside from the last traded price of US$1,201.

China official manufacturing PMI came below market expectations, setting a soft tone at Asian market openings. Manufacturing PMI receded to 50.1 from last month’s reading of 50.5, suggesting the pain of a global cyclical slowdown is probably going to sustain for a longer period of time. This could add more selling pressure over China equities, which have already been hammered by weak earnings and a fading hope of further stimulus.

China-sensitive currencies like the AUD and NZD fell quickly following the PMI reading, while JPY, CHF and USD were among the best performers in the G10 currencies. This suggests market sentiment is skewed towards ‘risk off’.

Today’s economic calendar is packed by a string of key EU data - preliminary GDP readings from France and the EU, unemployment data from Germany and the EU, and Germany inflation data. Do expect rising volatility in EUR/USD should GDP and inflation deviate too far from the latest readings. Technically, EUR/USD has found some support at 1.115 (the 127.2% Fibonacci extension) and its immediate resistance level can be found at the 1.205 (10-Day SMA) area.

China official manufacturing PMI - April chart


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