Dashed hopes of a more stimulus from the Bank of Japan sent the Nikkei crashing overnight and the sour feeling has spread into Europe. On Thursday all major equity benchmarks are falling and hitting the lowest in over a week.
Further monetary easing from central banks was part of what was being baked into the rally. Central banks aren’t looking quite as helpful as they were a day ago; the Fed have kept the door from shutting on a June rate hike and the Bank of Japan have shied away from offering negative rates on bank loans.
Poor quarterly results from Lloyds and Deutsche Bank have sent banking shares lower across Europe. Financials were the biggest drag on the FTSE 100 as Lloyds tumbled 4% after poorly-received earnings and Barclays fell over 1%, taking it lower since reporting its results yesterday.
Lloyds profits halved compared to the same period a year ago after it decided to buyback high yield bonds, though underlying profits did fall slightly to £2.1bn from £2.2bn. Given that net interest margin and income improved, capital reserves remained at a healthy 13% and there was no further provision for PPI claims, the drop in Lloyds shares looks like an overreaction.
US markets look set for a sharply lower open after a fairly neutral Federal Reserve meeting has proven not enough to counterbalance disappointment at the inaction from the Bank of Japan.
The tech-laden Nasdaq could get some reprieve from disappointment surrounding Apple Alphabet and Twitter quarterly results after Facebook easily topped earnings estimates.
It’s a sign of the times to see a story of record earnings at Facebook right next to a story of slumping ad revenues at a major UK newspaper. People spending a high proportion of their online hours on Facebook has seen advertisers flood to the site at the expense of other online outlets. This trend is even more evident on mobile where monthly active users increased and now contribute 82% of total ad revenue.
Facebook shares look set to open over 9% higher, taking them to new all-time highs. The gains perhaps could have been more were it not for a proposal to create a new class of C-shares which will further erode shareholder voting power, placing more power with founder Mark Zuckerberg.
Notable earnings before the US open: Altria, Bristol-Myers Squibb, MasterCard, AbbVie, Colgate-Palmolive, Ford
Notable earnings after the close: Amazon, Gilead Sciences, Amgen, Expedia, LinkedIn
USA pre-opening levels
S&P 500: 17 points lower at 2,078
Dow Jones: 149 points lower at 17,892
Nasdaq 100: 10 points lower at 4,406
CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.