European markets slumped on Tuesday, extending the slide this week to undo most of Friday’s gains. Since the Fed raised rates and the ECB underwhelmed in December, investor’s belief in the ‘central bank put’ has been shaken. The strong hints of more stimulus from the ECB which president Mario Draghi reiterated Monday night is not having the sustained positive impact it might have done in the past.
Oil prices continue to be the dominating driver of stock market direction. After prices plunged over 5% back below $30 per barrel late on Monday, Asian then European stocks have followed suit early Tuesday. Brent crude oil futures have now retraced two thirds of the gains from record lows, which could prove a tipping point for the sustainability of the rally. Either investors look to re-join the oil price recovery on hopes of a bottom or prices slip to new record lows.
A slide in BT and EasyJet shares meant consumer services and telecoms joined the energy sector at the bottom of the FTSE 100.
Renewed fears of a forced break-up by regulators have BT investors liquidating positions.
Easyjet shares were grounded after the airline blamed a fall in quarterly revenue on lower bookings resulting from the terror attacks in Paris and Egypt. Paris and Egypt are particularly sensitive to Easyjet as top flight destinations. Major rival Ryanair does not fly to Sharm el-Sheikh and cited the terrorist event as reason for a jump in passenger numbers to other destinations in December. Ryanair’s results demonstrate there are still strong industry trends. Easyjet have warned the current quarter’s revenue could decline further but the drop in Easyjet revenues has been relatively small and the tailwind of lower fuel costs should serve to support the bottom line over the medium term.
US stocks look set for a weak open ahead of quarterly results from a number of household names including Apple, Johnson & Johnson, Proctor & Gamble, Lockhead Martin, 3M and AT&T.
USA pre-opening levels
S&P 500: 9 points lower at 1,869
Dow Jones: 71 points lower at 15,814
Nasdaq 100: 25 points lower at 4,171
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