European markets had a decent day yesterday, rebounding from three-month lows, bringing some respite to recent declines, however we’ve opened lower this morning after a late sell off in the US, and a weak Asia session, with the tech sector leading this morning’s declines.

Further upside in markets could well be challenging unless there is a change to the macroeconomic picture, something that is starting to look increasingly unlikely, given that central banks are now appear to be shifting onto a more dovish footing. The RBA last night cut interest rates to a new record low of 1.25% as widely expected, over concern the Australian economy was starting to slow, given its heavy reliance on the Chinese economy.

Last night’s US sell-off had little to do with recent US, China trade tensions, which remain challenging, and more to do with an agreement between the US Free Trade Commission and the US Department of Justice who agreed a framework to look at anti-trust and anti-competitive behaviour amongst the big tech giants of Alphabet, Facebook, Apple and Amazon.

This is a big deal given that these companies are also facing challenges from European regulators and tie into recent comments by Chris Hughes, one of the co-founders of Facebook who suggested that it might be in the best interests of all if Facebook were broken up.

He said the company in its current form had too much of a monopoly and had too much control over speech. He went on to suggest that the FTC undo Facebook’s acquisitions of Instagram and WhatsApp. Talk of break-ups could also extend to Alphabet, given that it already has a degree of separation in its businesses, particularly with respect to its “other bets” as well as advertising and mobile revenues.

The tech sector has been one of the key drivers of the stock market rally over the past two years and as such anything that undermines that has the potential to push markets back towards the lows that we saw at the end of last year. The US Fang+ index could well be a key bellwether in this regard.

The US dollar slid sharply overnight after St. Louis Fed President James Bullard suggested a rate cut might come sooner rather than later. While this is the first time a Fed official has come out and articulated a rate cut is coming, markets have been pricing just such an outcome for several weeks now. He is also the most dovish member of all voting members on the FOMC, and as such would have been the most likely outie in any case. No other member has even come close to arguing for such a move, and with wage growth still well above 3%, unemployment below 4% and inflation subdued it could be a while before other members join him in such a dovish outlook.

The euro has pushed higher, currently unaffected by the prospect of political instability in Italy after Prime Minister Giuseppe Conti threatened to resign unless Deputy PM’s Salvini and Di Maio stopped squabbling and started governing. Italian yields have started to edge higher over concern that the Italian government is heading for a showdown with the EU Commission over its budget targets.

On the companies front Royal Dutch Shell outlined its latest strategy for the period up to 2025. The company said it was on track to deliver on its 2020 commitments, while increasing its organic free cash flow outlook to around $35bn by 2025. Management said this commitment had the potential to return another $125bn to shareholders over the same period in the form of dividends and buybacks, good news for all of those pension funds who own this oil major for the long term. For today the shares have slipped back a little, which is more likely to be down to concerns about oil demand, and a slightly weaker oil price today.

The company also outlined its achievements since 2017, which included an extra $10bn of additional cash flow on new projects since 2014.

On-line electrical retailer AO World posted its latest full year numbers which came in slightly worse than expected. Full year revenues came in at £902.5m, slightly above estimates, however, while losses did improve to £15.2m, this was more than expected due to bigger than expected losses in its European operation, of £30.1m. The UK operation actually showed a profit of £14.9m, helped by the acquisition of Mobile Phones Direct at the end of last year.

Online gaming company 888 Holdings shares are holding just above recent four-year lows after reporting a 6% rise in like for like revenues year to date, with sport leading the way with a rise of 29%. In the UK business was particularly good with revenues rising by 18%. The company also said that it was confident in its full year forecasts.

Ahead of the US open we could well see a modest rebound, nonetheless this story could well have further legs to it in the coming days, and as such it will be inevitable that eyes will remain on the tech giants in light of last night’s news regarding the FTC, however there are also a number of important earnings announcements as well.

Salesforce.com, a key player in CRM and cloud solutions will be announcing its latest Q1 numbers, with expectations of revenues of $3.67bn and profits of $0.60c a share.

Of more interest will be the company’s outlook for the next quarter in the current environment. At the end of last quarter management said they hoped to target revenue of $26-$28bn by fiscal year 2023. Any downward adjustment to this figure could prompt further weakness after the share price hit its lowest levels this year late last night.

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