Everybody knows the central bank-induced frenzy had to end sometime and there are some flashing red lights saying that time could be now. The central bank put option looks like it’s about to expire.
In the first day of her semi-annual testimony to congress Fed Chair Janet Yellen opted not to save markets and instead demonstrated a cautious optimism that the Fed can still gradually raise rates this year.
On the other side of the spectrum the Swedish Riksbank cut its headline rate further into the negative by 15bps to -0.5%. The Riksbank is presumably trying to ward off krona strength before further easing from the ECB in March.
The threat of further rate hikes from the Fed coupled with diminished prospects for a joint production cut between OPEC and non-OPEC producers have sent US oil prices back down to 12-year lows. The renewed slump in the price of oil has been unfortunate timing for French oil giant Total to report a 20% rise in annual net profits which CEO Patrick Pouyanne proclaimed as the “best performance” amongst the oil majors.
Rio Tinto scrapping its progressive dividend plan sent its shares to the bottom of the FTSE 100 alongside oil and financial sectors. The market is viewing Rio’s moderation of its dividend as a precursor to completely scrapping it.
US stocks look set for a rough start, joining in the global market turmoil after mixed tech company earnings overnight that could see shares of Tesla jump and Twitter slump. A two-year floor at $1800 in the S&P500 could be a defining level for global markets, if it gives way, then all bets are off.
Twitter shares could dip as much as 10% on the open after the social network reported that the fourth quarter of last year was the first period without any growth in its monthly active users. Tesla reported a surprise loss in earnings per share in the fourth quarter but the electric carmaker’s bullish forecastfor vehicle production next year is set to see shares head higher on the open.
USA pre-opening levels
S&P 500: 38 points lower at 1,813
Dow Jones: 319 points lower at 15,595
Nasdaq 100: 86 points lower at 3,880
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