Microsoft and Alphabet provide relief, new CEO for Reckitt, fake reviews put Amazon, Meta and eBay under the spotlight ahead of results, Persimmon bounces back

“The FTSE 100 and the other big European indices managed to avoid the big losses seen in the US overnight. Strong results from the tech sector after Wall Street had packed up and gone home for the day helped to steady nerves after renewed concerns about the banks,” says AJ Bell Investment Director Russ Mould.

“Microsoft and Alphabet, two firms whose fates feel increasingly intertwined thanks to their competing AI search offerings, both demonstrated some resilience as their earnings came in ahead of forecasts.

“Microsoft’s cloud computing arm saw a better-than-expected growth rate of 16%, helping to dispel fears about a slowdown in spending as economic realities bite. Talk of ‘healthy growth’ for the current quarter was like a vitamin pill for shareholders and helped the shares to big gains in after-hours trading.

“Google’s search advertising business also returned to growth despite the difficult backdrop, speaking to the continuing importance of the platform to advertisers.

“The problems at First Republic Bank have undoubtedly reopened the sores from March, as investors fret about the financial system again, and while the big US banks largely impressed at the start of this earnings season, numbers from regional lenders across the pond look set to be under heavy scrutiny in the coming days and weeks.”

Reckitt

“The FTSE 100 revolving door keeps spinning, this time with Kris Licht announced as the new chief executive of Reckitt. Interestingly this is an internal promotion, meaning there should be a continuation of the existing culture in the business.

“Reckitt has made plenty of mistakes in the past, including being too greedy with pricing, being slow with product innovation and overpaying for baby formula maker Mead Johnson in 2017.

“Licht was instrumental in helping to put the health business back on track and his task will now involve making the whole group more efficient and to drive up profit margins.

“At the moment Reckitt has been passing on extra costs to the customer via higher prices but volumes have been declining, illustrating how many people have been trading down from popular brands to supermarket own-label items which are more affordable. If economic conditions continue to be tough around the world, there is a risk to Reckitt this trend remains intact.”

Amazon / Meta Platforms / Ebay

“Trust is incredibly important when someone is buying goods from an online platform. They need to be sure that the product they want is good quality and will arrive safely and on time, and certainly not a knock-off. That means looking at reviews to see how others rate the merchant and the product.

“Unfortunately, there is a growing trend for merchants to publish fake reviews containing false information and often someone is paid to write a positive review regardless of whether the product or service is any good.

“Amazon and Meta Platforms, which both report numbers on Thursday, have previously come under fire for carrying fake reviews relating to products offered by third party merchants on their platforms. The same applies to eBay, which reports today.

“Growing customer dissatisfaction by users threatens to destabilise their status as go-to platforms. The problem of fake reviews that cheat customers has got so serious that the UK government is introducing new powers for the Competition and Markets Authority to tackle businesses that breach consumer rights law.

“Offenders face penalties of up to 10% of global turnover for breaching the law – which in the case of Amazon, Meta Platforms and eBay could be substantial sums of money. In 2022, Amazon made $514 billion revenue, Meta Platforms achieved $117 billion and eBay generated $9.8 billion.

“If things don’t change, consumers are going to vote with their feet and shop elsewhere. That could be devastating to Amazon, Meta and eBay. It means they will have to increase their efforts to police reviews and find better ways to stop merchants misleading consumers.”

Persimmon

“If you only looked at the headlines about a 42% drop in new home completions then you might be somewhat perplexed by the advances made by Persimmon’s share price today.

“However, the market is not going to be surprised by a slowdown which has been factored into valuations for some time and was expected by pretty much everyone.

“The reason for the relative optimism is the improved sales rate in the first quarter and the expectation that build rates will hit the top of the guidance range. Mortgage rates are such an important metric for the sector and an improvement here is helping to stoke demand.

“Challenges remain, inflationary pressures are proving sticky and Persimmon, like other housebuilders, can no longer expect soaring house prices to get it out of trouble.”

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