European markets traded lower on Tuesday morning after mixed corporate earnings and a lower oil prices added to cautious sentiment following recent geopolitical setbacks. The uncertainty amongst investors, despite the post-Brexit rise in global shares was evident in the latest German ZEW survey. The ZEW’s business confidence for the current situation and future economic sentiment both fell well beneath expectations.
One of the catalysts for rally in share prices since the Brexit vote has been the expectation of monetary stimulus. Those expectations were significantly dampened after the Bank of England caught markets by surprise by failing to cut rates last week. Since that decision, the FTSE 100 has been directionless, in part because of the resulting rise in sterling.
The muted reaction to the higher than expected rise in UK inflation suggests the rise in sterling is losing momentum. UK CPI rose 0.5% y/y in June, higher than the 0.4% expected and the 0.3% reported in May.
Royal Mail (LON:RMG) shares brushed off another decline in letter volumes after the delivery company reported a rise in parcel volumes. Royal Mail appears to be getting the mix of cost reductions and competitive pricing right to deliver more parcels in the UK. The bigger concern maybe the tail-off in demand for its international shipping from the likes of China.
Shares of Novartis (NYSE:NVS) dipped after the Swiss pharmaceutical firm reported second quarter profits and revenues ahead of expectations but issued a cautious warning for the full year outlook. The company faces declining sales of its top selling cancer drug Gleevec but is ramping up sales spending on heart medicine Entresto.
Shares of Akzo Nobel (LON:0LND) shares rose after cost-reductions helped the Dulux paint-maker beat profit estimates for a fifth straight quarter, despite falling revenues.
US stocks look set for a lower open after disappointing technology company earnings overnight that saw no update on a sale at Yahoo (NASDAQ:YHOO) and weaker subscriber numbers from Netflix (NASDAQ:NFLX).
USA pre-opening levels
S&P 500: 6 points lower at 2,160
Dow Jones: 29 points lower at 18,504
Nasdaq 100: 16 points lower at 4,603
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.