Before the bell: European markets under pressure

Yesterday, European markets were under pressure following poor macroeconomic data and corporate earnings. Today, all eyes are on the U.S. inflation report.

European investors weren’t feeling optimistic yesterday. Since Trump’s election, the Euro Stoxx 50 has been under pressure, and yesterday the index dropped 2.3%. Negative results from Bayer (-14.5%) and a slump in the luxury sector weighed on the index. LVMH (-4.5%) added to the pressure, amplified by unfavorable macroeconomic data. In the United Kingdom, unemployment rose sharply from 4% to 4.3%, while wage growth remained stable at 4.5% to 5%, posing a risk of further inflation. Meanwhile, Germany’s inflation rate increased from 1.6% to 2%, and the German ZEW Index fell from 13.1 to 7.4. This index measures economic sentiment in Germany, pointing to further economic weakness. The euro continued to fall and is now valued at only 1.06 dollars, as U.S. ten-year yields climbed 12 basis points to 4.44%. In short, there are plenty of concerns, which are also noticeable in Asia this morning.

On the corporate front, there is a bit of relief today. ABN Amro posted a net profit of 690 million euros, which is 160 million euros above expectations. Volkswagen Group increased its investment in electric carmaker Rivian by 800 million dollars to 5.8 billion dollars, which could support Rivian’s stock. Allianz reported strong figures, expecting full-year profits to be at the upper end of its guidance. Later today, Cisco and HP will report earnings, while U.S. inflation data may also drive market sentiment.

From zero to hero

When you have a platform with 640 million monthly users, you’re holding a gold mine. Since Swedish company Spotify began conquering the world in 2006, the music platform has come a long way. For over a decade, the company was unprofitable, but that’s now in the past. Investors will soon react to the company’s quarterly results, which look promising. Free cash flow for the quarter came in at 711 million euros—three times what it was in the same period last year. Revenue from premium subscriptions rose by 21%, while operating costs fell by 8%. The result? Stronger margins. It’s now clear that Spotify can sustainably generate cash, a reason why its stock has risen 145% over the past year. After today’s earnings, we expect another increase and a record high for the company.

History repeats itself

An investment lesson from the Wild West? During the Gold Rush in the United States, selling pickaxes was often more profitable than searching for gold. Many prospectors remained poor, while tool sellers made a fortune. In today’s digital world, a similar gold rush is underway as President Trump aims to relax Bitcoin regulations and build a strategic reserve. Yesterday, Bitcoin nearly hit an all-time high of 90,000 dollars. On the stock market, it seems history is repeating itself. Bitcoin miner Marathon Digital Holdings reported disappointing earnings and a significant loss. It currently costs more to mine Bitcoin than it sells for. The loss of 125 million dollars was almost as high as the company’s Q3 revenue. Just like in the Wild West, most digital gold miners are left in the red, with only a few making substantial profits. Will history repeat itself?

Did you know…

that a priority postage stamp from bpost is now worth more than the company’s stock? A priority stamp currently costs 2.27 euros, while the stock is priced at 2.08 euros.

This article was translated from Dutch and was originally published on Spaarvarkens.be.