Update Equities: Markets hold steady amid uncertainty
Equity markets did not choose a clear direction this week after mixed corporate results were reported. The extended US government shutdown, geopolitical worries and trade tensions added some uncertainty but didn’t cause a disturbance for now.
The financials sector had been one of the best performing sectors over the year, but recent setbacks have muted optimism. After last week’s concern about bad loans and fraud hitting two US regional banks, French bank BNP Paribas was found liable for atrocities committed in Sudan. The French bank may face significant financial and reputational risk following the US jury verdict. Barclays, on the other hand, benefitted from lifting its 2025 guidance and the announcement of a share buyback programme.
After the first wave of quarterly results from the financials sector, company reports from several consumer-related stocks were in the spotlight this week. Several bellwethers in both the consumer staples and consumer discretionary sectors reported quarterly earnings. Coca-Cola confirmed its outlook for the year, showing strong growth in non-carbonated drinks and sustained pricing power. Regionally, flat volumes in North America for Coca-Cola were offset by gains in emerging markets, mainly in Asia and Africa. In Europe, L’Oréal reported underwhelming results despite good growth in the luxury and professional products division, but US and Latin America sales disappointed. In consumer discretionary stocks, European luxury stocks declined after results at Hermès fell short of expectations. For Hermès, growth in the US was strong, and there was a slight improvement in China, but overall sales growth was slightly below expectations.
Finally, Netflix failed to meet expectations on earnings and margins. The settlement of a tax dispute in Brazil cost the company USD 619 million. Advertising revenue, however, hit an all-time high for the company during the past quarter. Netflix is also expanding its merchandising and live events strategies.
