Market scorecard
We are not out of the woods yet. Markets fell sharply last night as stocks were hit by renewed concerns about US banking sector liquidity. San Francisco-based First Republic Bank's shares dropped 49% after disappointing earnings and an update about its shrinking deposit base. They are exploring an asset sale of up to $100 billion of long-dated mortgages and securities as part of a rescue plan. We still believe that these problems are isolated and will be contained.
In company news, major stocks did well in after-hours trading, thanks to sterling first-quarter results. Microsoft shares advanced 8.5% and Visa went up 1.8%. Google also rose 1.7% after reporting strong ad sales and disclosing plans to buy back as much as $70 billion of its own stock.
Before the positive after-market action, the JSE All-share closed down 0.29%, the S&P 500 sagged by 1.58%, and the Nasdaq caved by 1.98%. We suspect that some of that damage will be repaired in trading today.
Our 10c worth
Michael's musings
As mentioned above, Microsoft posted better top and bottom line numbers than analysts expected. If the company holds onto the 9% after-hours gain, it will be trading at a one-year high and very near the all-time high seen at the end of 2021.
Microsoft and Amazon both complained in their previous quarterly results that their cloud-hosting divisions had been negatively affected by slowing customer IT spending. That seems to have been a temporary blip, as Azure revenue posted strong growth of 27%. Amazon only reports earnings on Thursday, but its share price was up 4% in after-hours trade, on the assumption that AWS will enjoy a similar recovery.
Microsoft noted an increase in sales as AI features were introduced into their suite of products. The expectation is for this trend to accelerate as more features are introduced and as an increasing number of customers embrace AI possibilities.
Microsoft is well-positioned as the key service provider for global businesses and is a must-own in your portfolio.
One thing, from Paul
Last week I explained why we write this daily newsletter. If you missed that, click here. Today I'll comment on why we read. That's all we do at work, apart from when we are dealing with direct client service tasks.
Irish-American writer and teacher Frank McCourt is best known for his bestselling memoir "Angela's Ashes", written in 1996. The book is about his impoverished childhood in Brooklyn, USA and Limerick, Ireland.
McCourt was an English teacher at Stuyvesant High School in Manhattan for decades. Once, when a student complained about having to read his setwork book, he made this pithy comment:
"You will read for the same reasons why your parents waste their money on your piano lessons. So you won't be a boring little shite the rest of your life."
Bright's banter
Leading audio streaming service Spotify reported mixed first-quarter earnings yesterday, with revenue coming in slightly below Wall Street's estimates. The Stockholm-based company saw its largest-ever first-quarter growth in monthly active users (MAUs). They now have an eye-popping 500 million MAUs.
Premium subscriber numbers beat expectations at 210 million for the quarter, up 15% year-on-year. They guided that monthly active users will grow to 530 million in the second quarter.
Spotify's gross margins beat expectations at 25.2%, and the company expects those to rise to between 30% to 35% over the long term, amid plans to further scale its podcasting and ads business.
Spotify's efforts to drive profitability included slashing jobs and eliminating initiatives like Spotify Live. However, softness in its ad business and further pressures related to foreign exchange hurt overall revenue in the quarter. Free cash flow was positive for the quarter.
Execution remains murky amid macroeconomic challenges. Spotify's share price was down as much as 5% before the earnings release but reversed earlier losses to climb more than 5.14%.
Linkfest, lap it up
Zomato is experimenting with inter-city food delivery. Regional food preferences in India are very strong - When a biryani flies hundreds of miles.
Al Jazeera's four-part series "Gold Mafia" has exposed a lot of corruption. A recent episode focuses on "most wanted" terror suspect Dawood Ibrahim - The man with 14 passports.
Signing off
Asian markets are looking a bit wobbly this morning, and the MSCI Asia-Pacific Index is in danger of falling for the fourth session in a row. Benchmarks in Japan, mainland China, and South Korea are lower, but Hong Kong has traded in the green.
Iron ore prices dropped below $100 a ton for the first time since December, a signal of waning Chinese commodity demand.
In other Asian news, a Singaporean man was executed earlier today after being convicted of trafficking one kilogram of marijuana. Wow, that's hectic.
The Rand is trading at around R18.34 to the greenback. US equity futures are strongly higher, reflecting the enthusiasm following better-than-expected earnings from big tech companies.
Tomorrow is Freedom Day in South Africa, when we celebrate the advent of democracy in 1994. Friday is a normal working day, and we will be on duty, and delivering a morning message to you at the usual time.
Keep well!
Sent to you by Team Vestact.
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