Technology giants continue to bet on artificial intelligence. The IMF provided new economic forecasts

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.07%, while the S&P 500 Index (US500) added 0.28%. The NASDAQ Technology Index (US100) closed positive by 0.61% on Tuesday.

The US consumer confidence rose to a two-year high in July on the back of a continued robust labor market and lower inflation, improving the economy’s near-term outlook. The Consumer Confidence Index jumped to 117 in July from 110.1 in June. That’s the highest level in two years. But consumers still fear a recession next year after the Federal Reserve sharply raised interest rates.

Microsoft (MSFT), beating Wall Street forecasts for fiscal quarter revenue and profit Tuesday, laid out an aggressive spending plan to meet the demand for new artificial intelligence services. The company’s spending surged as it built new data centers to support artificial intelligence, while its capital expenditures will continue to rise. The company’s stock fell about 4% on the report. Alphabet (GOOG) for the second quarter exceeded Wall Street’s expectations. Alphabet’s results were driven by robust demand for cloud services and an uptick in advertising. The company’s shares jumped by 8% in after-hours trading. Snap (SNAP) yesterday reported weaker-than-analysts-expected third-quarter guidance as it has to compete with tech giants in advertising, sending shares down -18%. The Snapchat app attracts hundreds of millions of users thanks to its simple photo filters and a new chatbot with artificial intelligence. However, the company has struggled to consistently grow revenue and catch up with competitors.

The International Monetary Fund on Tuesday slightly raised its global growth estimates for 2023, given robust economic activity in the first quarter, but warned that persistent challenges were worsening the medium-term outlook. The IMF now forecasts global real GDP growth at 3.0% in 2023, up 0.2% from its April forecast, but left its 2024 forecast unchanged, also at plus 3.0%.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) rose by 0.13%, France’s CAC 40 (FR40) fell by 0.16%, Spain’s IBEX 35 (ES35) declined by 0.38%, and the UK’s FTSE 100 (UK100) closed up by 0.17%.

Goldman Sachs (GS) lowered its 2023 eurozone growth forecast following weaker economic activity data.

The Bank of England on Tuesday forecast the Bank’s net loss will be just over 150 billion pounds ($193 billion) over the next ten years as it winds down its quantitative easing (QE) program, up from the 100 billion pounds forecast in April. These losses will have to be financed by the government at a time when public finances are already under pressure from rising interest rates and inflation.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) lost 0.06%, China’s FTSE China A50 (CHA50) jumped by 3.41%, Hong Kong’s Hang Seng (HK50) jumped by 4.10% on the day, and Australia’s S&P/ASX 200 (AU200) was positive by 0.46% on Tuesday. Senior Chinese officials said yesterday they would take additional measures to support the economy, which in turn sparked a sharp rally in local stocks.

Australia’s inflation rate continues to decline. For the last month, the annual consumer price index decreased from 5.6% to 5.4% (forecast 5.4%). Analysts believe that this decline should be enough to keep the Reserve Bank of Australia (RBA) from another rate hike in August. But according to economists, it will be much more difficult to reduce inflation further, and it is very likely that the RBA will make another rate hike in September.

The IMF forecasts growth in Japan’s economy but warns of inflationary pressures. Japan’s economy is expected to grow by 1.4% in 2023, faster than the 1.0% growth last year, as the lifting of pandemic restrictions stimulates consumption. IMF economists believe Japan’s ultra-soft monetary policy will remain accommodative in the near term, but the Bank of Japan should be ready to start raising interest rates given inflation risks.

S&P 500 (F)(US500) 4,567.46 +12.82 (+0.28%)

Dow Jones (US30) 35,438.07 +26.83 (+0.076%)

DAX (DE40)  16,211.59 +20.64 (+0.13%)

FTSE 100 (UK100) 7,691.80 +13.21 (+0.17%)

USD Index  101.29 -0.06 (-0.06%)

• – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).
• – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).
• – German Ifo Business Climate (m/m) at 11:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.