The biggest one-day market cap increase ever

The biggest one-day market cap increase ever. More broadly a mixed bag in mega-cap earnings so far with more to come, as revelations around returns on extraordinary AI spending are pored over by traders. Big bounces in beaten down sectors to finish an otherwise torrid month, will they hold? Intervention finally comes in Japan, and so far it appears that JPY pairs have stuck the landing. An extraordinary week in Korean markets, with widow-making moves in both directions. Energy markets falling back as activity in the Middle East does not match the rhetoric for now, USOIL -6%. A hold from the Fed further supporting equity markets, as well as metals, XAUUSD +1%. But are traders now too complacent on further hikes?

Biggest jump in history

Following its quarterly earnings release on Thursday, Microsoft's stock price rose 16%. The jump equated to additional market cap of $450 billion, the most ever added by a company in one day. The standout from the report was accelerating growth in Azure cloud revenue, up 43% in the fourth quarter. They also announced that growth in the cloud unit is expected to continue to speed up. Paid users of Copilot, Microsoft's AI assistant, rose 50% to 30 million. Capital spending figures came in below expectations, further pleasing investors. Microsoft's (MSFT.US) total revenue rose 18% to $90 billion, spurring on the stock to its biggest single-day gain since October 2008.

Meta, reporting at the same time, did not fare as well. Its AI expenditure has blown out to $145 billion, leaving cash flow historically low. That combined with a disappointing revenue forecast saw its stock slide by 8%. Apple (AAPL.US), reporting earlier today, did provide a strong sales forecast. But supply shortages in key components saw its stock slide around 6% in the after-market. Also reporting after the bell today was Amazon (AMZN.US). Revenue from the Web Services unit (AWS), responsible for around a fifth of the company's overall sales, jumped 37%. This went a long way to assuaging fears that the company's AI spending would not see commensurate returns, and sent its stock up around 10%.

Interyention (with US backing) 

USDJPY saw its biggest intraday drop since December 2023 yesterday, the pair down 3.3% at one point before settling around 159.5. While not yet formally confirmed by Japanese authorities, all evidence points to what now feels like a long-awaited intervention finally having arrived. Comments earlier in the week from Treasury Secretary Scott Bessent strongly implied that the US would be supporting the cause too. And while Finance Minister Satsuki Katayama remained tight-lipped when queried about the overnight moves and what was behind them, top currency official Atsushi Mimura did come close to confirming said backup from the US, “I do recognise that we’ve received support from the US that goes beyond simply moral support”.

This discreet and almost stealth approach from Katayama stands in stark contrast to the manner in which previous interventions have been carried out. In April this year, several serious warnings were issued to the public in the lead-up to the most recent action being taken by the central bank. This time even post-intervention, very little is being given away by authorities. Intervention data will be released next week, but only relating to operations conducted between April and June. The added heft of US backing this time around means traders will be keeping an even keener eye out for further action over the coming days. 

Next week 

While rates were left unchanged by the Fed this week as expected, it was a split (9-3) vote. Thus major data releases between now and August's Fed meeting will be live and important. The first is non-farm payrolls, hitting next Friday. The unemployment rate is expected to stay at 4.2%, with 88k jobs added. These numbers would be soft enough to bolster the case for another hold in August.

US earnings season continues. Highlights include Palantir and Snap in the after-market session on Monday. Tuesday brings AMD, and SpaceX (SPCX.US) handing down its first release as a public company, in which traders will be watching for any further talk of a merger with Tesla. Wednesday we get Uber, Disney and SanDisk. Thursday Airbnb and DraftKings. And lastly on Friday Berkshire Hathaway. Go well out there.