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WEEKLY MARKET ROUND-UP – 20/11/20

Earnings respect

In contrast to the existential battles facing many industry sectors, America’s biggest tech names generally made excellent progress in the first nine months of the year, raking in close to $740bn in aggregate. Thanks to a boom in platform usage Amazon, Facebook and Microsoft all delivered double-digit revenue growth.

Reporting season boosts S&P 500

By Monday (16 November), more than 90% of the companies in the US S&P 500 Index had reported their third quarter earnings with many far exceeding the muted analysts’ expectations for the period. By then, 83% of companies had reported a positive earnings surprise with 71% also beating sales estimates.

Not surprisingly, healthcare, consumer staples and technology-related sectors were among the biggest winners with around 85% of companies overall beating earnings per share (EPS) estimates – up from around 78% at the same point last year. Disney reported the largest EPS surprise; although still in negative territory, its EPS beat expectations by more than 70%.

Meanwhile in Europe, where 85% of the STOXX Europe 600 Index had reported, only 44% of companies delivered positive earnings surprises with 49% beating sales estimates. In Japan, only 15% of the TOPIX index reported positive earnings news with 22% beating sales forecasts.

Of the 23 FTSE 100 companies to have reported by Monday, some 26% boasted positive earnings surprises with 30% beating sales expectations.

China signs world's biggest trade deal

Asian equity markets rallied on Monday (16 November) following news that China and 14 other countries in the Asia Pacific region had signed an historic trade agreement by video link the previous day.

The Regional Comprehensive Economic Partnership (RCEP) follows eight years of negotiations and brings some 2.2bn people – or around 28% of global trade and a third of global economic output – under one umbrella, which removes around 90% of tariffs within the region.

The deal is the first between China, Japan and South Korea and includes the 10 members of the Association of Southeast Asian Nations (Asean) alongside Australia and New Zealand.

The agreement is estimated to add $200bn a year to the global economy within a decade. Japan and South Korea are seen as the biggest winners, with the door now open for greater co-operation with China. The move further diminishes America’s influence in the region after President Trump withdrew from the Trans-Pacific Partnership in 2017 in a move aimed at restraining China’s influence.