market falling stocks lower bear market

European stocks appear to be ending the session in the red, as the global slide continues. 

Stocks quickly moved off the low of the session in early trading but are nowhere near the breakeven point for the day. Even though this major stock decline originated in the US, stocks on this side of the pond have been well and truly caught up in the chaos.  

BP revealed a respectable set of fourth-quarter results, but the over-all sell in equities has put pressure on the stock. Fourth-quarter profits jumped from $400 million to $2.1 billion, which comfortably beat the expectation of $1.9 billion. Output is now at its highest level since 2010. The downstream division also had a ‘very strong’ quarter.

Stagecoach were the latest victim of putting in bids that were too competitive for government contracts, and the government may take over the running of the running of the Edinburgh to London train line. Stagecoach ‘got their numbers’ wrong and now it now their bottom line. The share price has been falling since 2015, and should the bearish trend continue it could fall to 112p.

Ocado shares took a knock after the company swung to a loss of £500 million from a profit of £12 million last year, warned on future profits and is raising £155 million through issuing new shares. The aims to invest heavily in technology and it expects earnings to ‘significantly’ improve next year. Last month the stock hit a four year high and if it can stay above 400p it outlook may remain bullish.

US

The Dow Jones and S&P 500 started the day very much offside, and then managed to drive into positive territory only to slip back again. The volatility index (VIX), or as it is known as the fear index jumped to it highset level since 2011. Traders don’t know which way to turn as uncertainty is running high.  The colossal range on the US indices sum up how irrational equity traders are at the moment, and while some go bargain hunting, others are fearful we could see another leg lower.

The trail spin that US stocks are in started on Friday when the impressive average earnings figures from the US got traders worried about 4 interest rate increases from the US this year. Investors know the US economy is strong and the situation is improving, and the only thing to fear is the fear that other investors have about the stock market.  

FX

The US dollar index has jumped to a two week high as the possibility of four interest rate hikes from the Federal Reserve is playing on traders’ minds. From late last month, the US dollar was showing signs of bottoming, and now we could be looking at the beginning of a bounce back.

EUR/USD is suffering at the hands of the jump in the US dollar. German manufacturing orders in December jumped by 3.8%, while the consensus was for a rise of 0.7%. It has been a relatively quiet day in terms of eurozone data, and the moves in the currency pair has been driven by the greenback.

GBP/USD is also under pressure from the positive move in the US dollar. Traders are still mindful of the slower than expected growth in the services sector in the UK yesterday. The industry accounts for approximately 75% of British output, so the cooling of the growth rate has dampened any hopes traders had for slightly hawkish comments from the Bank of England on Thursday.  

Commodities

Gold has been driven lower by the strength of the US dollar. Under different circumstances the metal would have attracted some of the cash that is flowing out of the stock markets, but the robust greenback has prevented that. Traders are mindful the Fed would hike interest rates four times this year, and hence why the metal is in the red.

Brent Crude and WTI are higher on the day as the market is bouncing back. The energy market has been drifting lower after reaching a three year high last month and near-term trend has been to the downside. The volatility in the US dollar is impacting the oil market, but while OPEC and the US play back in forth in terms of curtailed supply and excess supply the energy market may hang around these levels.

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