Elon Musk buys Twitter. Stocks up before tech earnings

Tesla CEO Elon Musk has clinched a deal to buy twitter for $44 billion. Stocks in Europe are set to rebound after steep losses in the previous session and as attention shifts to earnings.

•         Oil steadies after falling by as much as $7 per barrel yesterday on demand fears
•         GBPUSD edges higher from 18-month low hit yesterday, PSNB was less than forecast
•         Earning season ramps up with HSBC beating forecasts, Microsoft and Alphabet due after the US close

Shares of Twitter were a bright spark with market sentiment hurt more broadly over concerns about tighter monetary policy and a slowdown in China. Elon Musk managed to woo shareholders with his offer of $55.20 per share. A company wholly owned by Musk will take Twitter private.

European bourses closed sharply lower yesterday, with the commodity-focused FTSE tumbling by 1.8% to close at its lowest level in a month. Concerns over China’s strict zero-COVID policy, further lockdowns, and the implications for growth in the world’s second-largest economy and, more broadly, global growth hit risk sentiment.

Oil

Commodity prices came under pressure, including oil which plunged by as much as $7 per barrel before settling 3.5% lower below $100 as fears over the demand outlook overshadowed Russian supply concerns. While oil prices have edged 1% higher ahead of the European open, demand concerns persist. So far, the current China lockdown has seen demand fall by 1 million barrels per day. With widescale testing now taking place across 12 districts, the chances of a further hit to demand looks increasingly likely, which could keep the id on any gains. Looking ahead, API oil inventory data will be in focus.

UK PSNB

UK public sector net borrowing in March was £18.1 billion according to the ONS, below the £19.25 billion forecasts However the ONS also reported that PSNB hit £151.8 billion in the financial year ending March ’22, the third-highest financial year borrowing since record began.

GBP/USD is edging higher today, snapping a four-day losing run, which has seen the pair fall just shy of 2.5%, breaking below 1.28 to a level last seen in September 2020. The Pound has traded under pressure as investors scale back their expectations for rate hikes across the year amid fears that the BoE could tip the UK into recession if it raises interest rates too aggressively. This is in stark contrast to the Federal Reserve, which, as we heard from Federal Reserve Chair Jerome Powell last week, is considering several outsized hikes before the end of the summer.

HSBC

Europe’s largest bank posted a Q1 pre-tax profit of $4.2 billion, a 27% drop from the $5.78 billion profit posted the same period a year earlier but was still ahead of forecasts of $3.7 billion. A rise in lending volumes and personal banking operations helped offset the hit to earnings as HSBC reported an expected credit loss of $600 million, partly as a result of the Russian Ukraine war and the Chinese commercial real estate woes, compared to a release of $400 million in Q1 2021 when the outlook was improving.

US tech earnings

Looking ahead towards the US session, attention is shifting toward big tech earnings which kick off in earnest today. The Nasdaq managed to close yesterday 1.3% higher yesterday, despite a shaky start and futures are heading higher today. 

That said, the tech-heavy index trades 8.5% lower across the month of April, hurt by the prospect of a higher interest rate environment, which is less favorable for high tech growth stocks. Broadly speaking, big tech is expected to see a slowdown in growth in 2022. However, Microsoft, which is due to report after the close today, is expected to deliver the fastest earnings growth this year.