Markets stabilise, Amazon impresses, Apple basks in services glory and WPP slumps on profit warning

“Markets have started to stabilise after a chaotic week led by the US debt downgrade and further interest rate hikes in the UK,” says Dan Coatsworth, stock market analyst at AJ Bell.

“The FTSE 100 was flat on Friday morning, while parts of mainland Europe including France and Spain saw small gains. Asia moved higher across the key markets in Hong Kong, mainland China, Japan and India.

“Pre-market indicative prices suggest US markets will also move higher. Non-farm payrolls numbers in the US released later today are expected to show a robust jobs market.

“Amazon’s better than expected second quarter results have put investors in a better mood. Its cloud computing problems aren’t getting worse, costs are being lowered in its fulfilment network and retail customers are getting their orders faster than ever.

“Sadly, the positive sentiment didn’t extend to all parts of the market, with the UK seeing several big downward movements. Capital slumped 11% after flagging up to £25 million of costs associated with its recent cyber-attack. WPP was close behind with a 7% decline after a nasty profit warning linked to US tech clients spending less on advertising.”

Apple

“Some of the most successful businesses in the world are the ones who create an ecosphere. Customers initially sign up for one service and then slowly add more, to the point where they become so reliant on them that switching elsewhere is unfathomable. Apple is the master of this game.

“It has developed a reputation for selling premium-priced hardware that has different functionality to rivals. Once someone has bought a laptop, a phone or something else, Apple then upsells a range of services – and it’s this part of the business which has become a key profit driver as the margins are spectacular.

“The number of paying subscribers for its digital services has exceeded one billion worldwide. Without this success, the market would have been a lot more worried about its earnings given that iPhone and iPad sales were lacklustre.

“The services arm provides a welcome cushion to the group, but Apple still needs to revive hardware sales growth otherwise the market is going to worry about the next generation of customers to join its ecosphere.

“It is time for Apple to launch something new and innovative, not just another variation of its core products.”

WPP 

“Advertising agencies are a good proxy for the state of the economy. If corporates are worried about the near-term outlook, they cut back on advertising and marketing. If they’re bullish, they spend more on promotions.

“The fact WPP has issued a profit warning is telling. The problems lie with US technology companies, many of whom have spent this year slashing costs across their business, including jobs. Many over-hired as we came out of the pandemic and are now having to right-size operations. Paying close attention to money coming in and money going out will naturally lead to a sharper eye on marketing and advertising expenditure.

“Nevertheless, tech is a highly competitive market and to stand out from the crowd tech firms will have to keep dishing out the dollars on promotional activity, so WPP will no doubt be banking on the sector downturn being short-lived.

“Rival agency S4 Capital last month issued a similar warning with tech clients being cautious. Interpublic and Omnicom have also disappointed with their latest updates, suggesting the advertising and marketing industry is going through a cyclical downturn.”

These articles are for information purposes only and are not a personal recommendation or advice.