Facebook spikes 20%, Barclays puts buyback on ice

European stocks are heading for a higher start, adding to gains from the previous session, boosted by a deluge of earnings despite the Russian ‘energy war’ with Europe.

•         Earnings boost the market mood, overshadowing gas supply concerns
•         USD/JPY jumps to 130.00, a fresh 20-year high after a dovish BoJ
•         Meta rises 19% pre-market after reporting a return to user growth

European stocks are managing to build on gains despite ongoing concerns over Europe’s energy security and mixed messages over what happens next. European Commission President Ursula von der Leyen warned companies not to heed to Russia’s demands to pay for gas in rubles. However, some European companies, such as Italy’s ENI, have met Putin’s demands.

Instead, upbeat corporate earnings are attracting the limelight, with Standard Chartered Q1 pre-tax profits beating forecasts thanks in part to rising interest rates. Unilever beat first-quarter sales forecasts after the consumer staples firm hiked prices to offset higher costs from supply chain issues and rising energy prices. Barclays reported better than expected first-quarter earnings. However, the bank is putting its share buyback plans on hold amid the fallout from the trading error.

USD/JPY

The BoJ sent the yen tumbling in the Asian session after sticking with its ultra-loose monetary policy and doubling down on its bond purchase program. The BoJ, one of the most dovish major central banks, pledged to continue buying bonds every business day as part of its stimulus measures supporting the economy. This is in sharp contrast to the Federal Reserve, which is expected to raise interest rates by 50 basis points in May and possibly again in June, with another outsized hike that could even be squeezed in before the end of the summer.

The central bank meeting highlighted the growing gulf between the Fed and the BoJ, sending USD/JPY toward 130.00 and a fresh 20-year high.

USD

Dollar strength is proving to be a key theme. While stock markets are edging higher, market fears are being channeled into safe-haven trades toward the dollar, sending the USD dollar index to a five-year high.

USD strength and the escalation of Russia’s energy war with Europe pulled EURUSD to 1.05, a level last seen in April 2017 and bringing EURUSD losses for the month to 5%, its worst performance since 2015. Meanwhile, GBP/USD has dropped to a 23-month low of 1.25.

Looking ahead, US GDP data is expected to show growth of 1% annualized, down from 6.9%. An upside surprise could unleash further USD strength.

Meta

Facebook parent Meta saw its share price jump just shy of 20% in late trading after impressing the market with better than expected Q1 earnings. The social media giant reported EPS of $2.72, ahead of consensus estimates of $2.56. Revenue rose 7% YoY to $27.91 billion, below the $28.2 billion forecast – revenue would have been higher had it not been for the Ukraine war. 

Facebook added more new users than expected, calming concerns that the company was losing out to a new generation of social media platforms such as TikTok. Daily users rose to 1.96 billion marking a return to growth following a decline in the December quarter. The Meta share price had lost almost 50% of its value before the release.