Equities Equities Equities

Equities under pressure from weak data and tech tax

Peter Garnry

Head of Equity Strategy

Global equities declined 0.7 % last week as macro beats are getting smaller and smaller in the G10 countries. The macro surprise index remains just barely above zero indicating that the steam is coming off. This week is critical for equities as many macro events will hit markets and because sentiment is weakening.

Macro heavy week

The macro events this week are going to set the direction for the coming weeks. Today and tomorrow the G20 countries are meeting in Argentina and discussions will center on trade policy with the Trump administration's tariffs on steel and aluminum to take effect on Friday. Topics such as China's purported theft of intellectual property rights will likely also be discussed. We are weighing towards mostly negative headlines will come out of the G20 meeting.

ZEW figures for March are out on Tuesday expected to show a cooling of future expectations and current situation supporting the recent macro fatigue. On Wednesday, the new Fed chairman Jerome Powell will hike the Fed Funds Rate to 1.75 %. This will likely flatten the yield curve even more, as the short end of the curve is rising much faster than the long end with the US 10-year yield stuck in the 2.8-2.9 % area. A flattening yield curve is typically a signal that a recession is getting closer. There is already a growing group inside the Fed that is getting increasingly worried about this and advocating for a pause in rate hikes. This could potentially be the biggest turnaround in markets in 2018 if the Fed was to pause rate hikes.

US yield curve
On Thursday, ZEW surveys for March and euro area PMI figures for March will hit markets. The consensus among economists is for both time series to soften from February again supporting the growing but slowing theme in markets. On the same day, the European Central Bank will also release its Economic Bulletin from it latest meeting giving more insight into the most recent decision. Our main hypothesis is for the ECB to remain very loose in its monetary policy as the euro area is still struggling with overcapacity in certain regions. On Thursday, investors will also get US PMI figures for March and the US Leading Index expected to remain elevated, showing robust growth in the US.

Our main thesis is still that the macro will continue to disappoint against expectations, negatively impacting investor sentiment. We believe equities remain in a transition period where new evidence will either show a slowdown or a final acceleration of economic growth in this economic cycle. Our dynamic asset allocation model remains defensive post February's volatility shock.

Technology and Facebook

Facebook shares are down almost 4% as the Cambridge Analytics Files were revealed over the weekend by the Guardian. The files expose a major data scandal that Facebook did little to contain or correct. This scandal will fuel into the Mueller investigation and potentially pave the way for the regulation of Facebook as the social media platform is a national security asset because people's behaviour can be impacted through the network.

NASDAQ 100 futures are down 1.3% in pre-market as the EU Commission is considering a technology tax of 3% on revenue. This is move to make technology companies, that are extensively using transfer pricing to avoid taxes in high tax rate countries, to pay more to society. These are just the first signs that major technology companies will be more regulated in the future. It is key for long-term investors in technology to have this on the radar.

Chinese earnings to dominate

The Q4 earnings season is in its final stage but this week major Chinese earnings are scheduled for release. Below are the key earnings releases to watch:

Oracle (Mon) – high expectations for outlook given new database product and changes to cloud business model. Our Equity Radar model has a negative rating on the stock.

Ping An Insurance (Tue) – Q4 is expected to be strong driven by investment performance and new premiums growth. Our Equity Radar model has a neutral rating on the stock.

Tencent (Wed) – revenue expected to grow 56 % in Q4 but operating margin is expected to come under pressure as the company diversifies into other fast-growing but lower margin businesses such as payment. Our Equity Radar model has a neutral rating on the stock.

PetroChina (Thu) – Q4 and 2017 is expected to see drastically improved results y/y as the oil price is up compared to last year. Lower oil production is likely to slow down while gas production has likely been strong due to a cold winter. Refinery business has likely also been strong. Our Equity Radar model has a neutral rating on the stock.

China Mobile (Thu) – focus on 4G subscriber growth which is likely to fall from Q3. Fixed-broadband sales likely offset most of the impact from the government's removal of domestic roaming charges which were implemented to increase competition and give better prices for consumers. Our Equity Radar model has a high positive rating on the stock. 

Accenture (Thu) – cloud and analytics are the key drivers of growth that is higher than its peers. Our Equity Radar model has a high positive rating on the stock.

Nike (Thu) – focus is no market share loss to Adidas and changing consumer preferences in North America. Apparel sales is key focus for investors for them to believe in Nike's turnaround. Our Equity Radar model has a neutral to slightly positive rating on the stock.

Micron Technology (Thu) – this stock has consistently been in our Equity Radar's top 40 list but the recent rally has pushed it outside.. Analysts are still expecting strong demand for DRAM and NAND memory chips. Our Equity Radar model still has a moderately high positive rating on the stock.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.