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FTSE 100 gains ahead of tech giant earnings, Diageo dips

All eyes will be on the United States and the technology sector today as behemoths Microsoft and Alphabet report earnings after the bell as big tech earnings season kicks off in earnest.

The FTSE 100 was 0.48% higher as general optimism helped lift sentiment across Europe. Tonight will be a big test of the rally over the past week, and investors will be on the edge of their seats as Microsoft and Alphabet earnings come in.

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“The next two days will test investor sentiment thanks to the publication of financial results from two of the biggest names on the global stock market and the Federal Reserve’s next interest rate decision,” said Russ Mould, investment director at AJ Bell.

“Microsoft and Alphabet release numbers after the US market close tonight and investors will be hoping for some stellar results to help sustain positive momentum among equities. The S&P 500 and Nasdaq have been on a roll since early January and a successful showing from these two tech giants could easily keep the market rally going. However, positive results are not a given, and multiple stocks in the so-called Magnificent Seven group of mega-cap tech names have shown cracks in recent months.”

The S&P 500 has broken to all-time highs on several occasions this year, while the FTSE 100 has remained range-bound.

Investors will have one eye on tomorrow’s Federal Reserve interest rate decision in anticipation of any hints on where rates are going in H2 2024.

Diageo

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Diageo was the FTSE 100’s top faller on Tuesday after the drinks company provided further insight into weakness in the Latin American and Caribbean region, where sales fell in the first half and are expected to fall further in the second half.

Diageo was down 3.2% at the time of writing.

“Persistent problems with too much inventory in Latin America have prolonged the hangover for Diageo. So much for the idea this was a short-lived issue,” Russ Mould said.

“Drinkers in Brazil have been switching from spirits to beer, which is traditionally a much lower margin product for the manufacturer. Furthermore, sales through the cash and carry channel have been weaker which has put Diageo in a difficult position. Distributors and retailers are sitting on too much unsold stock which has a negative knock-on effect for future orders from Diageo until that overhang works its way through the system.

“Perhaps drinks cabinets at home were well-stocked during the pandemic and people still have plenty of spirits left over, so there is no need to keep buying more for a while?”

3i Group was the FTSE 100’s top riser after receiving an upgrade from equity analyst at Barclays.

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