By Geoffrey Smith
Investing.com -- Apple (NASDAQ:AAPL) reports quarterly results amidst expectations for record service revenue. China's death toll from the coronavirus rises but so does the recovery rate. The Federal Reserve kicks off its two-day policy meeting against a backdrop of data on durable goods and consumer confidence, while the ECB flagged the increasing strains of low interest rates on the profitability of eurozone banks. Here's what you need to know in financial markets on Tuesday, 28th January.
1. Mixed news on the coronavirus
The death toll from the novel coronavirus rose to 106, according to Chinese government data, while the number of confirmed cases rose to 4,515. Chinese authorities also reported 60 cases where patients had recovered, strengthening impressions that the virus may not be as lethal as the SARS virus was 17 years ago.
Restrictions on public life in China continue to point to a dip in economic activity, however. Hong Kong suspended ferry and rail services with the mainland, while Shanghai municipal authorities instructed factories to stay shut until Feb. 8. Other manufacturing centers have also taken similar measures.
The Chinese yuan touched a new low against the dollar earlier in the day but losses were more moderate than on Monday.
2. Apple's first earnings since launching streaming service
Apple (NASDAQ:AAPL) is set to report another record quarter for revenue from its growing services division when it posts its quarterly earnings after the closing bell, helped by the launch of its Apple TV streaming service in November.
Also of note will be Apple’s guidance on the smartphone market, which it has previously said will surge this year due to upgrades to 5G-supportive devices.
Analysts polled by Investing.com expect the first quarter of Apple’s 2020 fiscal year to show earnings per share up 9% on the year at $4.54, on a 4.5% rise in revenue to $88.38 billion.
Services revenue – the key to Apple’s long-term outlook, given the increasing saturation of the global smartphone market, rose 17% in the 2019 fiscal year.
3. Stocks set to bounce after Monday horror show
U.S. stock markets are set to bounce at the open after their worst day in months on Monday. By 6:30 AM ET (1130 GMT), Dow 30 futures were up 62 points, or 0.2%, while S&P 500 Futures were up 0.2% and Nasdaq 100 futures were up 0.5%.
After the bell on Monday, Whirlpool (NYSE:WHR) stock and Juniper Networks (NYSE:JNPR) stock had both fallen in response to their respective quarterly updates.
In Europe, the recovery was a more mixed affair, with the German DAX and Dutch AEX both falling under the weight of disappointing updates from index heavyweights SAP (DE:SAPG) and Koninklijke Philips (AS:PHG). The benchmark Stoxx 600 fell 0.1%, while the U.K. FTSE rebounded a modest 0.1%.
4. Fed meeting starts; durable goods, consumer confidence data due
The Federal Reserve kicks off its two-day policy meeting against a backdrop of concerns for the world economy due to China’s measures to stop the spread of the coronavirus. Analysts expect the central bank to keep its official interest rates unchanged, despite fresh criticism last week from President Donald Trump.
The day’s economic data include the release of monthly durable goods orders at 8:30 AM ET and the Conference Board’s consumer confidence survey at 10 AM ET. There will also be regional business surveys from the Dallas and Richmond Feds.
5. ECB fails six banks in its annual capital review
The European Central Bank said that six banks fell short of their capital requirements in its latest supervisory review. That’s up from one a year ago.
The ECB also said it was concerned by the low profitability of many of the banks it monitored. Low interest rates, high operating costs and limited flexibility in cutting jobs mean that many banks are earning below their cost of capital, which limits their ability to issue fresh equity should they need to.
The ECB’s supervisory head Andrea Enria also warned that governance standards had slipped in the last year, and expressed concerns about operational risks.