By Geoffrey Smith
Investing.com -- Amazon (NASDAQ:AMZN) rounds off a spectacular earnings season for Internet platform companies, but the EU takes the edge off the euphoria with a new antitrust ruling against Apple. Chinese regulators are also cracking down on their homegrown Internet giants. The Eurozone slumped back into recession in the first quarter as expected, and stocks and oil are consolidating after exhausting their near-term upside potential. Personal income and spending data and consumer sentiment numbers are due later from the University of Michigan. Here's what you need to know in financial markets on Friday, April 30th.
1. Amazon makes it a full house for Big Tech
Amazon rounded off a banner earnings season for Internet platform companies, posting a net profit of over $8 billion for the first quarter, more than triple the previous year’s result. Familiar drivers were at play: revenue from Cloud hosting rose 32%, while the company’s advertising business grew by nearly 70%, albeit from a lower base. Amazon stock was up 2.4% at a new record high in premarket trading,
Results from Big Tech this week have shown emphatically how the dominance of the biggest platform companies – Apple (NASDAQ:AAPL), Amazon, Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), has intensified. Regulatory reactions continue to bubble, with the EU ruling on Friday that Apple’s policy on streaming is an abuse of its dominant position.
By contrast, more niche players in the same space have struggled to compete: Pinterest (NYSE:PINS) and eBay (NASDAQ:EBAY) both slumped after posting their results, and Twitter also disappointed with its earnings late on Thursday. Twitter stock slumped over 11% in premarket trading to its lowest in nearly three months.
2. China expands its Internet crackdown
Chinese regulators expanded their crackdown on the country’s biggest Internet companies, imposing tough new rules aimed notably at their financial services arms.
Companies including JD.com (NASDAQ:JD), Meituan (OTC:MPNGF), Xiaomi (OTC:XIACY) and Didi Chuxing were ordered to set up financial holding companies that will be subjected to clear capital requirements, reducing their profitability.
The move broadly mimics the action taken recently against Alibaba (NYSE:BABA) affiliate Ant Group, and also follows a $1.6 billion fine levied this week on Tencent (HK:0700) for past antitrust violations. Chinese stock indices all fell, albeit relatively modestly, with a drop in China's official manufacturing PMI also weighing on sentiment.
3. U.S. stocks set for some profit-taking at open
U.S. stock markets are set to open lower later, retreating from record highs on profit-taking at the end of another strong month.
While earnings season has largely lived up to sky-high expectations, pockets of weakness – such as Twitter and Pinterest – along with the awareness of high valuations are making it harder to advance any further, at least in the near term.
As of 6:30 AM ET (1030 GMT), Dow Jones futures were down 96 points, or 0.3%, while S&P 500 futures were down 0.4% and Nasdaq 100 futures were down 0.5%, notwithstanding the uplift from Amazon.
The data calendar later is headed by personal income and spending data for March, along with the price index for personal consumer expenditures, the Federal Reserve’s preferred measure of inflation. The University of Michigan’s consumer sentiment index, which also includes a measure of inflation expectations, is due at 10 AM ET.
4. Eurozone falls back into recession
Official data confirmed that the Eurozone economy slid back into recession over the turn of the year, with first-quarter gross domestic product data showing a decline of 0.6%, leaving GDP down 1.8% on the year. The figures, which were stamped by the effects of prolonged lockdowns and a slow start to the vaccination campaign, were still marginally better than expected.
The Eurozone’s inflation rate accelerated to 1.6% in April, from 1.3% in March, as the familiar pattern of base effects pushed the headline inflation rate closer to the ECB’s medium-term target. However, excluding food and energy, prices rose only 0.8%, in line with the bank’s assessment of weak underlying dynamics.
The euro, which had risen as high as $1.2135 on Thursday, fell back below $1.21, while the German 10-Year bond yield also retreated back below -0.20%. That’s despite signs of further improvement with regard to the pandemic.
5. Palladium hits new record as oil and copper struggle
Oil prices retreated a little from seven-week highs, in an echo of the slight pullback in equities at the end of a barnstorming month.
By 6:30 AM ET, U.S. crude prices were down 1.4% at $64.07 a barrel, while Brent crude was down 1.2% at $67.23 a barrel.
Elsewhere in the commodities space, copper failed to hold above the $10,000 a ton mark, many speculative players having apparently decided that that was the level at which to book profits.
However, palladium futures were unstoppable, topping $3,000 an ounce for the first time.