UK and Europe
No debt deal for Greece and an investigation into Daimler's (LON:0NXX) emissions testing have prompted a second weak day on European markets. European stocks are coming in for a bit of profit-taking at the end of a very positive week that saw the German Dax recoup all its losses and turn positive for the year.
Shares of Daimler have dropped 7% dragging the shares of most European automakers down with them after the company announced it had begun an investigation into its diesel emissions testing. It’s not great timing with the Daimler news arriving just two days after Mitsubishi announced its own improprieties on fuel efficiency. Investors in the auto sector are understandably perturbed.
The week started on a sour note with markets plunging after an agreement to freeze oil production was derailed by the ongoing spat between Saudi Arabia and Iran. As it turned out, the Doha dip proved to be the bottom. Oil prices proved immune to the failed attempts at a production freeze and moved to new 2016 highs, taking equities along for the ride.
Some poorly-received earnings as well a pullback ahead of important banking results next week has meant the story in the UK has been slightly different. The FTSE 100 has run into some technical selling after reaching the 6400, the peaks of the fourth quarter last year and its 200 week moving average.
Every sector of the FTSE was in the red on Friday with Sainsbury’s (LON:SBRY) the top riser after a broker upgrade whilst miners Anglo American (LON:AAL) and Rio Tinto (LON:RIO) propped up the UK benchmark.
The Japanese Nikkei was the exception to the rule, rising over 1% as bank stocks rallied and the yen lost value on unconfirmed reports that the Bank of Japan would offer negative rates on loans.
US
A flood of quarterly earnings reports from American blue-chip companies after yesterday’s close and before today’s open kept investors in check on Friday
The Dow Jones has come off its highs towards the end of the week, slipping away from 18,000, not helped by a drop in shares of Alphabet and General Electric (NYSE:GE) and McDonalds (NYSE:MCD).
Shares of Alphabet dropped 6% on the open of US trading after the Google (NASDAQ:GOOGL) holding company announced results that failed to match high expectations. Google shares dropping after missing high expectations has bucked a trend in the first quarter of companies beating lowered expectations. The drop in pay-per-click costs is one of the stand-out concerns from the quarter but might be inevitable as the company relies more on banners on YouTube and its other platforms.
Bellwether General Electric saw shares fall after it beat adjusted earnings estimates but revenues came short. GE made a loss of $98m when costs of disposing of financial assets are included, an improvement over the -$13bn loss in the same quarter a year ago. GE is in a process of going back its roots; turning away from the financial sector that brought the company to its knees in the financial crises and buying industrial assets like Alstom’s grid business.
FX
Outside of the Japanese yen, FX markets were quiet on Friday with the British pound edging out gains as traders reduced bets on a possible Brexit after the intervention of US president Obama in favour of Britain staying in the EU.
The Japanese yen plunged; taking USD/JPY back above 111 on a report the Bank of Japan would offer banks negative rates on loans. The policy would go a long way to counterbalance the negative rates on deposits for bank profitability. It also takes central bank meddling to new levels.
Commodities
Commodities were broadly stronger on Friday with oil and silver making another run at multi-month highs. It would be surprising if silver could quickly reverse the huge downturn that took place after touching the highs of May last year near $18.70 per oz. Copper gained over 1% to reach a one-month high just short of $2.30 per lb.
DISCLAIMER: 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.