After a choppy session US markets finally finished yesterday in positive territory, helped by further gains in crude oil prices, but also by some better than expected numbers from firms like Facebook and Caterpillar, and a slowing realisation that the path of potential US rate rises is unlikely to play out as expected, which in turn is likely to cap the potential for further US dollar gains.
The Fed’s room for manoeuvre on rates is likely to become much more restricted in this regard given recent poor economic data which would appear to suggest that growth in Q4 slowed more sharply than had been initially suspected. Yesterday’s poor durable goods number is likely to see this afternoons Q4 GDP number get revised lower from what is likely to be the initial reading of 0.8% later today.
As we look ahead to the final day of a disappointing month the surprise decision by the Bank of Japan to join the Swiss National Bank and the European Central Bank in cutting rates into negative territory has given markets in Asia and here in Europe a welcome lift into the weekend, and as such is likely to translate into a positive US open as well.
Today’s gains are broad based led by Telecoms and financials with Sky leading the pack after reporting strong revenue growth in the first half of this year.
Banking stocks are also pushing higher, though at some point the question has to be asked with interest rates so low, it is likely to be much more difficult for banks to turn a profit with yield curves starting to flatten out so much. HSBC, Barclays and Standard Chartered are all higher.
Airline stocks are also higher despite oil prices continuing to remain resilient, though they have come off their highs, as doubts creep in about the ability of OPEC to ever agree on anything.
Mining stocks are slipping back as the recent rebound in commodity prices starts to run out of a little bit of steam.
Stocks in focus in the US today include Amazon after the company missed its latest earnings forecast by quite some way reporting profits of $1 per share, some way below the $1.56c expected.
Mastercard is also set to report its latest Q4 numbers and it will be hoping that it is able to match Visa’s positive update from earlier this week.
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