Market Commentary Outlining Critical Economic and Company Developments



Market View: Accommodative ECB to support equities

  • European equities opened higher this morning supported by very strong earnings in the US, a softer Euro helped by a dovish ECB.
  • Draghi announced a €30bn reduction to its current €60bn a month QE bond buying programme which is set to begin from January 2018 and run for an additional 9 months. However, Draghi left the programme open ended and suggested it could be extended if inflation hasn’t reached its 2% target.
  • This saw 10-year German bond yields reverse from 0.50% to 0.42% and EURUSD move from $1.1830 to $1.1630.


Bank of Ireland: Q3/17 results should settle investor concerns

  • Bank of Ireland pre-released Q3/17 trading update yesterday afternoon which showed the underlying business is in good shape.
  • A statement from Bank of Ireland’s CEO, Francesca McDonagh Wednesday evening regarding the tracker errors and an in-line set of Q3 results this afternoon has seen its share price rally 5.3% yesterday.
  • Focusing on Q3/17 results, the Group generated net interest income in Q3/17 in line with first half of 2017. It reported a Net Interest Margin (NIM) of 2.34% for the first 9 months of 2017, saw continued improvement in asset quality, small growth in new lending, and a 30bps strengthening in its capital position to 12.8% which sets the stage for a reinstatement of its dividend early in 2018.


Amazon: Exceptionally strong revenue growth in Q3/17

  • Amazon reported exceptionally strong results over Q3/17 results overnight. It grew revenues by 34% YoY to $43.7bn during Q3/17, beating analyst expectations by 3.8%.
  • This solid top line growth was driven by growing share of retail, the continued adoption of e-commerce, robust third-party unit growth, and the rapid rise of Amazon Web Services (AWS) where Amazon maintains its market leading position.
  • The market reacted very positively to Amazon’s results overnight, rallying off 8% after hours and it will likely see broad based earnings and target price upgrades by analysts on the back of these results.             

Alphabet: Revenue growth re-accelerates

  • Alphabet reported strong Q3/17 results overnight and rallied 4% after hours. Alphabet reaccelerated revenues by 24% YoY to $27.8n in Q3/17 which was 1.5% above market’s expectations at $27.2bn.
  • This exceptionally strong performance was driven by mobile search, a strong performance from YouTube, ongoing momentum from programmatic, and substantial growth in other revenues from cloud, play, and hardware sales.
  • Google trades at 11.5x FY18e EV/EBITDA which is attractively priced in our opinion for a company which will continue to benefit from the secular shift towards digital/ mobile advertising, which is highly cash generative, operates at impressive EBITDA margins and has a renewed focus on capital discipline.


Source Cantor Fitzgerald 27th October 2017