SAP slashes outlook; Eurozone slowdown fears mount - what's moving markets

By Scott Kanowsky

Investing.com -- SAP cuts its outlook after the divestment of its Qualtrics unit, while the balance of European business activity tips towards services and Tesla shares drop sharply.

1. SAP lowers guidance

Shares in SAP (ETR: SAPG) slipped in early trading on Friday after the business software group slashed its annual profit guidance, following the divestment of its subsidiary Qualtrics.

The tech giant sees non-IFRS operating profit at a range of €8.6 billion to €8.9 billion in 2023, a decrease of €200 million from its previous outlook. Revenue at its key cloud unit is also expected to come in at between €14B to €14.4B, slipping by €1.3B from its prior estimates.

The Walldorf, Germany-based firm noted that it has already stripped earnings from Qualtrics, the U.S.-listed corporate online survey maker it divested last month, out of its latest results. But SAP's returns have yet to include any income from the sale.

Meanwhile, first quarter revenues at the cloud division surged by 22% to €3.18B but still missed average Bloomberg consensus projections of €3.22B.

On a group-wide basis, three-month revenues were above expectations, thanks in large part to a boost from one-time license fees. Analysts at Jefferies argued that the beat was "not for the right reason," adding that investors will likely remain focused on the performance of the cloud business.

2. Services surge in Europe while manufacturing falters

Stock markets in Europe are under pressure to close out the trading week, with traders mulling over economic data out of the Eurozone.

A preliminary survey from S&P Global showed that business activity in the currency area touched an 11-month high in April, which the data provider is noting that this indicates that the economy has "gained further growth momentum" to begin the second quarter.

But S&P Global flagged that the upturn has become "increasingly unbalanced," with a surge in the services sector compensating for weak manufacturing output sparked by a slump in demand for goods.

Business confidence has remained resilient in the face of the recent banking industry crisis while easing supply constraints helped moderate inflationary pressures, S&P Global said.

However, Hamburg Commercial Bank chief economist Cyrus de la Rubia warned that price developments in the services sector will likely continue to worry European Central Bank officials.

"This increases the likelihood that the ECB will tighten monetary policy more, or for longer," de la Rubia said.

3. Tesla shares slump

Tesla (NASDAQ: TSLA) shares plummeted by 9.75% on Thursday, after the electric vehicle manufacturer posted first quarter earnings that missed Wall Street estimates due in part to price cuts aimed at boosting sales.

The stock has now fallen by just under 50% in the past one-year period, although it was in the green in premarket trading on Friday.

Elsewhere, Twitter, the social media platform run by the billionaire, began removing the verified blue check marks off of the accounts of celebrities like Justin Bieber, Ben Stiller, and Katy Perry. Last week, Musk said Twitter would start taking off these check marks, which were used under the site's previous leadership to identify high-profile users and corporations.

It is the latest step in Musk's controversial drive to overhaul the company, but fueled concerns that it be harder for users to discern real tweets from impersonations or hoaxes.

4. U.S. futures steady ahead of PMI data

U.S. futures hovered widely around the flatline, as traders awaited the release of business activity data out of the world's largest economy.

At 04:38 ET (08:38 GMT), the Dow futures contract dipped by 27 points or 0.08%, S&P 500 futures were down 2 points or 0.07%, and Nasdaq 100 futures were lost a point or 0.01%.

Later in the session, S&P Global will release its preliminary composite purchasing managers' index for April, with the survey expected to show that activity inched up slightly during the month.

Meanwhile, on the earnings calendar, consumer goods giant Procter & Gamble (NYSE: PG) is among the major corporate names reporting today.

5. Oil prices under pressure

Oil prices held steady in the face of worries that the U.S. - the world's top crude consumer - may slip into a recession this year.

U.S. crude oil inventories fell more than forecast last week, Energy Information Administration data showed earlier this week, but gasoline stockpiles jumped unexpectedly on disappointing demand.

By 04:47 ET, U.S. crude futures traded 0.03% higher at $77.39 a barrel, while the Brent contract gained 0.05% to $81.14.

Both benchmarks slid by more than 2% to their lowest level since late March on Thursday, and are on track for a weekly drop of about 6%.

You May Also Be Interested In

• Oil prices recover on tight supply bets even as M.East fears clear
• Tesla (TSLA) soars on Q1 print
• Tesla prices, Big tech earnings, Bitcoin - what's moving markets