FirstFT: Tech benefits appease investors

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Stock markets rallied after technology groups Microsoft and Google owner Alphabet reported confident results and outlook despite growing bleak outlook for the global economy.

Satya Nadella, chief executive of Microsoft, said on a call with analysts that his company had gained market share across its businesses and that demand for its cloud services is expected to remain robust as many users IT professionals are looking for more cost-effective ways to manage their IT.

Ruth Porat, Alphabet’s chief financial officer, called her company’s results “solid”. She said Google’s cloud business and search advertising were strengths.

Alphabet shares rose 5% in after-hours trading and Microsoft rose 4%. The positive reaction to the results sent stocks around the world and US futures higher. Contracts that track the technology-heavy Nasdaq 100 gained 1.4%, while futures on the broader S&P 500 rose 0.9%.

The upbeat comments from the tech sector contrast sharply with yesterday’s results from consumer companies, which warned of rising prices and falling demand. Results from Unilever, Coca-Cola and McDonald’s laid bare the impact of global inflation. They came a day after retailer Walmart warned profits would come in lower than expected as inflation weighed on US consumers.

Analysts had predicted weak results from technology groups following warnings from smaller rivals Snap and Twitter. They had also warned in advance of the very difficult comparisons companies faced from results a year ago, which were spurred by Covid-19 lockdowns and the shift to working from home.

Biden, Xi to hold call as tensions rise over Pelosi’s visit to Taiwan Joe Biden and Xi Jinping will hold a phone call tomorrow, according to a US official, as tensions mount over Nancy Pelosi’s planned visit to Taiwan. The Democratic Speaker of the House of Representatives and second successor to the presidency plans to visit the island next month. Do you think Pelosi should visit Taiwan? Have your say in our survey.

2. The rise in gas prices in Europe is accelerating Gas prices in Europe jumped today after Russia followed through on its threat to further cut gas supplies to the region. Europe’s benchmark TTF contract rose 12%, taking its gains for the week to more than a third, after gas moved through the Nord Stream 1 pipeline, which carries energy from Russia to Germany, has been reduced by about half to 20% of its capacity.

3. Credit Suisse appoints a new director Struggling Swiss lender Credit Suisse has appointed Ulrich Körner as chief executive and announced plans to cut its investment banking business as it launched its second strategic review in less than a year. The group also announced a loss of 1.2 billion Swiss francs for the second quarter, much worse than the 206 million Swiss francs expected by analysts.

4. BlackRock withdraws support for climate and social resolutions BlackRock’s support for U.S. shareholder proposals on environmental and social issues nearly halved during this year’s annual meeting season. The world’s largest fund manager said Russia’s invasion of Ukraine had changed the calculus of investments and shareholder proposals were becoming too prescriptive. For more ESG news, subscribe to the Moral Money Newsletter.

5. El Salvador seeks to ease default fears with sovereign bond buyback
The Central American country that adopted bitcoin as legal tender last year said yesterday that it plans to buy back $1.6 billion of its sovereign bonds in a bid to allay fears of a default.

The day ahead

Fed interest rate decision The Federal Reserve is expected to tighten US monetary policy further with a second rate hike of 75 basis points, while at least one senior governor backs the Federal Open Market Committee to go even further.

business profits Facebook owner Meta is the latest Big Tech company to report earnings. It has made changes to its app to more aggressively compete with Chinese-owned TikTok and reportedly intends to slow down hiring. Industry groups Ford and Boeing are also releasing their second quarter results and are expected to share their views on the impact of inflation and supply chain disruptions on their businesses.

What else we read

Mike Pence faces Donald Trump Back-to-back speeches in the US capital were the latest evidence of the simmering feud between the former running mates turned political enemies as the two consider a 2024 White House bid.

America’s top regulator fires a warning shot Rohit Chopra, director of the Consumer Financial Protection Bureau, warned that Big Tech’s entry into buy now, pay later loan companies risks undermining competition in the nascent sector and raises questions about the use customer data.

Wall Street Memo: Don’t Touch That Delete Button! On Wall Street and Washington, no one seems to have thought about the risks of using personal devices for business purposes. Wall Street banks said this month they expected to pay $200 million each for failing to retain text and WhatsApp conversations on bankers’ personal phones. In addition, the US Department of Homeland Security has opened a criminal investigation into the disappearance of texts from Donald Trump’s security service. This is nonsense, writes Brooke Masters.

Can Eutelsat take part in a space race? French satellite operator Eutelsat and British start-up OneWeb, which is losing money, are go for the moonshot: a merger that stakes their future on the challenge of SpaceX of Elon Musk and the Kuiper project of Jeff Bezos. Do they stand a chance of disrupting the once stable space industry?

Josep Borrell: It’s time to save the Iran nuclear deal The High Representative of the EU for Foreign Affairs and Security Policy presented a text setting out the best possible agreement which he considers feasible as a facilitator of the negotiations. In the Financial Times, he explains why this is the best way to go.

Books

Former Fed Chairman Ben Bernanke and historian Edward Chancellor offer conflicting perspectives on the central bank crisis in two new books edited by Martin Wolf. “The Chancellor wrote an overheated and unbalanced polemic,” writes Martin. “Still, that doesn’t quite justify Bernanke’s managerial perspective.”

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