Investor sentiment has continued to remain fickle as a slide in oil prices was all that was required to send yesterday’s rebound back down the wall of worry, and back onto the slope of sorrow.
Since the beginning of this year equity markets have not only spun their wheels, they have lost any semblance of positive traction as continued concerns of oversupply in the oil and gas market set against a backdrop of slowing global growth has seen stock markets across the globe slip back into bear market territory.
Even the expectation of further stimulus from Chinese authorities hasn’t been enough to buck the trend and the risk is that we could well see further losses until such times that oil prices give any indication that they might be able to find a floor.
Today’s worst performers have once again been in the commodities sector, with Anglo American (L:AAL), BHP Billiton (L:BLT) and Glencore (L:GLEN) at the bottom of the FTSE100, after BHP reported that it was cutting its iron ore production guidance in the wake of the Brazilian Samarco tragedy.
Royal Dutch Shell (L:RDSa) is also feeling the chill hitting its lowest levels in five years after reporting that it expected to see a 40% slide in Q4 profits to between $1.6bn and $1.9bn. What is more concerning is the recent declines in Shell’s share price has been accompanied by a rise in volumes which suggests that investors are starting to lose confidence, at a time when questions marks are increasingly being asked about the size of the price tag of the deal with BG Group (L:BG).
Bank shares have also come under pressure with Barclays (L:BARC), Standard Chartered (L:STAN) and HSBC Holdings (L:HSBA) all down heavily, along with insurers after Zurich Insurance Group (VX:ZURN) announced that the cost of the UK floods was likely to be in the region of £200m, in Q4 putting downward pressure on Legal & General (L:LGEN) and Aviva's (L:AV) share price.
Pubs usually tend to see a bit of a drop off in sales in January as consumers cut back after their pre Xmas binges, so the last thing you want to see is a profits warning. Unfortunately that’s precisely what we got from J D Wetherspoon PLC (L:JDW) as the company warned that profit for the year would be at the lower end of expectations. As a result the share price has dropped faster than a barrel through the open door of the beer cellar, down 9% on the open, and to two and a half year lows.
As a result of this morning’s losses in Europe, US markets look set to follow suit and open sharply lower.
Stocks in focus are likely to include Netflix (O:NFLX) which reported earnings above expectations of $0.07c a share after the bell last night, its numbers being driven by sharp growth in international subscribers.
IBM (N:IBM) also beat expectations on the top line.
On the data front we are expecting the latest US CPI inflation numbers to show an uptick in pricing pressures for December with headline inflation ticking up to 0.8% on the year from 0.5% in December, while core prices are expected to remain stable at around 2%.
The Dow Jones is expected to open 360 points lower at 15,656
The S&P500 is expected to open 40 points lower at 1,841
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