Amazon's result, Vale's dividend cut and stronger oil provide a mixed bag of news
International news was mixed for investors last night. US stock indices are now all about the profit reporting season. A great session for Facebook yesterday followed soft a bad session for Apple the day before.
This whipsaw pattern may be repeated with Amazon missing estimates with its after-market report. The bar had been set high for Amazon with its stock rallying hard into the close. Given its status as a star performer in the online sales space and also that its results speak to the overall strength of consumer demand, even a modest miss on expectations will be a negative for stock market sentiment.
News that Vale, the big Brazilian iron ore miner is unlikely to pay a dividend has mixed messages for Australian miners. It’s a reminder of the inevitability that investors in this sector face significant cuts to dividend income. Vale’s dividend cut also reflects its balance sheet problems. This makes it increasingly likely that the Brazilian miner will ultimately need to cut some of its higher cost production. This could be good news for Australian miners, especially Fortescue which has often been seen as the likely swing producer.
Oil prices continued to rally last night as markets prepare for the possibility of positive news such as US production cuts and a weaker $US. OPEC representatives have denied knowledge of Russian plans to reach a production agreement but it’s doubtful that many traders saw recent reports of these plans as a serious near term possibility.
Markets will have a watching brief on the Bank of Japan’s meeting today, especially given its record of surprising the market. Traders are becoming less certain that any additional stimulus will have a significant impact on the Yen, especially given reduced expectations for US rate hikes. This will mean that any additional BOJ stimulus initiatives may have to be pretty substantial to influence markets beyond an initial announcement effect.
Frequently Asked Questions about this Article…
Amazon's recent earnings report missed estimates, which negatively impacted investor sentiment. As a major player in online sales, Amazon's performance is closely watched, and even a modest miss can influence overall stock market sentiment.
Vale's decision to cut its dividend sends mixed signals to Australian miners. While it highlights the potential for reduced dividend income in the sector, it also suggests that Vale may need to cut higher-cost production, which could benefit Australian miners like Fortescue.
Oil prices are rallying due to market anticipation of positive developments, such as potential US production cuts and a weaker US dollar. Although OPEC representatives have denied knowledge of Russian production agreements, traders remain optimistic about future price increases.
Investors should keep an eye on the Bank of Japan's meeting, as it has a history of surprising the market. Any new stimulus initiatives will need to be substantial to have a lasting impact, especially given the current uncertainty around US rate hikes.
The performance of tech giants like Facebook and Apple can significantly influence the stock market. A strong session for Facebook followed by a weak one for Apple illustrates the volatility and impact these companies have on investor sentiment and market trends.
Reduced expectations for US rate hikes mean that any additional stimulus from the Bank of Japan may need to be substantial to affect the Yen. This uncertainty makes it challenging for traders to predict the Yen's movement based solely on US monetary policy.
Fortescue is often seen as a likely swing producer because it can adjust its production levels in response to market conditions. With Vale potentially cutting higher-cost production, Fortescue may benefit from increased demand for its iron ore.
Consumer demand is crucial for Amazon's stock performance, as it is a leading player in online sales. The company's earnings reports are closely watched as indicators of consumer spending trends, and any deviation from expectations can significantly impact its stock price.
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