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Markets nervous after tech shakeout and ahead of US GDP - business live Markets nervous after tech shakeout and ahead of US GDP - business live
(about 1 hour later)
Here’s an interesting chart on market bubbles:
A brief history of recent asset price “bubbles”… pic.twitter.com/3vPfZEFIU4
The eurozone is seeing steady economic growth, thanks to a revival in world trade, according to S&P Global Ratings. In a new report, the agency says:
Global momentum has lifted the eurozone’s economic prospects, and it now appears to have reached cruising altitude. The economic and monetary union closed 2017 on a high note, with GDP growth at 2.5%, its fastest pace in a decade.
...S&P Global Ratings’ economists say the chief reason for this is the revival of world trade, which has put the eurozone’s industries back in motion. Capacity utilization was just short of its 2007 high, triggering stronger investment and boosting industry prospects for this year.
However, the general fall in sentiment surveys at the start of 2018 indicates that eurozone growth is leveling off. Firms are increasingly reporting that supply constraints, rather than demand, are a drag on output. Nonetheless, for now, we expect the growth momentum will stay solid, thanks to the broad-based economic expansion and strong domestic fundamentals.
It added:
Strong fundamentals in the eurozone suggest that economic expansion will continue at a brisk pace, and we have raised our GDP growth forecasts for the region to 2.3% this year and 1.9% in 2019.
We’ve also raised our euro-dollar exchange rate forecast to $1.27 in 2018 and $1.3 in 2019, since we expect the dollar’s weakness will persist.
The current growth cycle appears to have peaked, but the remaining slack in the labor market and productivity rebound will keep inflationary pressures in check until the end of 2019.
Because inflation will likely remain subdued this year, we expect the ECB will only gradually wind down its asset purchase program from September until the end of this year. As the gap between structural and real unemployment diminishes, earnings growth will accelerate. Thus, we think underlying inflation is set to move closer to the ECB’s target at the end of 2019, giving the ECB enough leeway to raise rates in Q3 2019.
#ftse100 under pressure, trend support being tested, touch here could signal a chance to rally? pic.twitter.com/FAa65abmtJ
Meanwhile the pound is edging higher, up 0.16% against the dollar at $1.4177 and 0.21% better against the euro at €1.1430. Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi, said:
The ongoing reduction in Brexit risks and more hawkish outlook for Bank of England policy are the key drivers behind the pound’s upward momentum.
The pound has derived some additional support from a report that Irish officials have been told to expect new plans “imminently” on how Britain plans to avoid a hard border with Northern Ireland. While short on details, the report has further boosted confidence that the UK and EU can find a workable and timely solution to the Irish border issue to support plans for a “smooth & orderly Brexit”. Nevertheless, it still remains a potential banana skin for the pound in the coming months if intensified Brexit talks do not progress as well as hoped.
Among the day’s company news, furniture group DFS has bucked the gloom in the high street with an upbeat outlook.Among the day’s company news, furniture group DFS has bucked the gloom in the high street with an upbeat outlook.
It reported a 7.4% fall in underlying half year profits to £30m, in line with expectations, and chief executive Ian Filby said:It reported a 7.4% fall in underlying half year profits to £30m, in line with expectations, and chief executive Ian Filby said:
We have seen a strengthening trading performance across the first half of the financial year and through February into March. We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in [earnings] and generate strong cashflow across this financial year, in line with our expectations.We have seen a strengthening trading performance across the first half of the financial year and through February into March. We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in [earnings] and generate strong cashflow across this financial year, in line with our expectations.
Analysts at Stifel issued a buy note, saying:Analysts at Stifel issued a buy note, saying:
Management is striking a confident tone today (despite a challenging market), as the group heads into an easier comparison phase....The shares were pricing in bad news, so we’d expect to see a decent relief rally today.Management is striking a confident tone today (despite a challenging market), as the group heads into an easier comparison phase....The shares were pricing in bad news, so we’d expect to see a decent relief rally today.
Indeed the shares are up nearly 6% in early trading. Stifel addedIndeed the shares are up nearly 6% in early trading. Stifel added
We still believe in the long-term attractions of DFS Furniture. It is a highly cash generative market leader, which is consolidating the physical market at the same time as some online pure players re-evaluate their business models.We still believe in the long-term attractions of DFS Furniture. It is a highly cash generative market leader, which is consolidating the physical market at the same time as some online pure players re-evaluate their business models.
More on the tech fallout, which saw the US FANG stocks have their worst day for more than two years. Naeem Aslam, chief market analyst at Think Markets, said:More on the tech fallout, which saw the US FANG stocks have their worst day for more than two years. Naeem Aslam, chief market analyst at Think Markets, said:
The tech sector is predominantly getting battered, mainly due to the woes of Facebook’s data breach. We clearly have three kind of investors when it comes to the Facebook; firstly there are some who are jumping out of the ship, pushing the stock price lower. Secondly, we have investors who are watching the show from the sideline and thinking there is more pain to come as we do not know how big the potential fine could be. This is not helping the stock price either. Finally, we have those who are not interested in Facebook anymore as they think that the regulatory burdensome on Facebook is too risky for their appetite and they do not want to get involved in this stock.The tech sector is predominantly getting battered, mainly due to the woes of Facebook’s data breach. We clearly have three kind of investors when it comes to the Facebook; firstly there are some who are jumping out of the ship, pushing the stock price lower. Secondly, we have investors who are watching the show from the sideline and thinking there is more pain to come as we do not know how big the potential fine could be. This is not helping the stock price either. Finally, we have those who are not interested in Facebook anymore as they think that the regulatory burdensome on Facebook is too risky for their appetite and they do not want to get involved in this stock.
We personally think, that Facebook has strong fundamentals and it has become the part of everyone’s daily life, so once we have a clear idea about the potential sum which the firm would have to pay as a result of this situation, the stock price could present a potential opportunity.We personally think, that Facebook has strong fundamentals and it has become the part of everyone’s daily life, so once we have a clear idea about the potential sum which the firm would have to pay as a result of this situation, the stock price could present a potential opportunity.
As for the FANG stock including Microsoft, Twitter, it is likely that the Facebook incident would open the door for more scrutiny for other firms, and lawmakers would see how other firms are using user data. This could really open the can of worms and open a potential opportunity for short sellers.As for the FANG stock including Microsoft, Twitter, it is likely that the Facebook incident would open the door for more scrutiny for other firms, and lawmakers would see how other firms are using user data. This could really open the can of worms and open a potential opportunity for short sellers.
Following the falls on Wall Street and in Asia, European markets have indeed dropped back in early trading.Following the falls on Wall Street and in Asia, European markets have indeed dropped back in early trading.
The FTSE 100 is down 0.7%, with software group Sage slipping 1.8% and mining shares also among the leading fallers. France’s Cac and Spain’s Ibex have fallen 0.9% while Italy’s FTSE MIB is 0.88% lower. In Germany, the Dax has dropped 0.77%.The FTSE 100 is down 0.7%, with software group Sage slipping 1.8% and mining shares also among the leading fallers. France’s Cac and Spain’s Ibex have fallen 0.9% while Italy’s FTSE MIB is 0.88% lower. In Germany, the Dax has dropped 0.77%.
In the wake of the decline of the US technology stocks, Europe’s tech index is down 1.1%.In the wake of the decline of the US technology stocks, Europe’s tech index is down 1.1%.
Here are IG’s opening calls for European markets:Here are IG’s opening calls for European markets:
European Opening Calls:#FTSE 6946 -0.78%#DAX 11868 -0.86%#CAC 5069 -0.91%#MIB 22008 -0.91%#IBEX 9398 -0.80%European Opening Calls:#FTSE 6946 -0.78%#DAX 11868 -0.86%#CAC 5069 -0.91%#MIB 22008 -0.91%#IBEX 9398 -0.80%
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
An early rally on Wall Street went south by the close of play yesterday, and the turnaround is likely to weigh on European markets at today’s open.An early rally on Wall Street went south by the close of play yesterday, and the turnaround is likely to weigh on European markets at today’s open.
Relief that the US and China appeared to be talking about averting a damaging trade war between the world’s two biggest economies had given some support to markets. But a tech turnaround saw the Dow Jones Industrial Average drop 1.4% while the Nasdaq Composite dropped 2.93% and the S&P 500 fell 1.73%.Relief that the US and China appeared to be talking about averting a damaging trade war between the world’s two biggest economies had given some support to markets. But a tech turnaround saw the Dow Jones Industrial Average drop 1.4% while the Nasdaq Composite dropped 2.93% and the S&P 500 fell 1.73%.
The so-called FANG technology stocks - Facebook, Amazon, Netflix, and Google (now Alphabet) were under pressure on fears of growing regulation in the wake of the Cambridge Analytica revelations. Tesla was also a big faller, down more than 8% on news of a Federal investigation into a fatal crash in California.The so-called FANG technology stocks - Facebook, Amazon, Netflix, and Google (now Alphabet) were under pressure on fears of growing regulation in the wake of the Cambridge Analytica revelations. Tesla was also a big faller, down more than 8% on news of a Federal investigation into a fatal crash in California.
The drop in the US filtered through to Asia, with the NIkkei 225 down 1.4% and the Hang Seng 1.57% lower.The drop in the US filtered through to Asia, with the NIkkei 225 down 1.4% and the Hang Seng 1.57% lower.
In Europe the FTSE 100 is forecast to open down around 50 points, back below 7000, while Germany’s Dax could drop 120 points after European markets ended higher on Tuesday. Michael Hewson, chief market analyst at CMC Markets, said:In Europe the FTSE 100 is forecast to open down around 50 points, back below 7000, while Germany’s Dax could drop 120 points after European markets ended higher on Tuesday. Michael Hewson, chief market analyst at CMC Markets, said:
For all the gains seen in US markets over the past 18 months the bulk of these have been driven by tech stocks, and yesterday these tech stocks swooned quite sharply, reversing a good proportion of Monday’s gains, in the process dragging the S&P500 back down towards its 200 day moving average.For all the gains seen in US markets over the past 18 months the bulk of these have been driven by tech stocks, and yesterday these tech stocks swooned quite sharply, reversing a good proportion of Monday’s gains, in the process dragging the S&P500 back down towards its 200 day moving average.
This rolling over in tech stocks looks set to weigh on European markets this morning, with a lower open as markets mull over the potential for uncertainty over a tech sector that could catch a cold as a result of Facebook’s woes around user data.This rolling over in tech stocks looks set to weigh on European markets this morning, with a lower open as markets mull over the potential for uncertainty over a tech sector that could catch a cold as a result of Facebook’s woes around user data.
With the increasing focus on what is going with respect to how Facebook has managed its users personal data, it must surely be only a matter of time before attention turns to the rest of the tech sector, and how companies like Alphabet, Twitter, Microsoft and Apple to name a few, manage their own users personal data. If lawmakers do turn their attention to the rest of the sector, which seems likely, then it is hard not to see how other tech companies will escape scrutiny on how they use this user data, raising the prospect that we could uncover other practices that invite scrutiny.With the increasing focus on what is going with respect to how Facebook has managed its users personal data, it must surely be only a matter of time before attention turns to the rest of the tech sector, and how companies like Alphabet, Twitter, Microsoft and Apple to name a few, manage their own users personal data. If lawmakers do turn their attention to the rest of the sector, which seems likely, then it is hard not to see how other tech companies will escape scrutiny on how they use this user data, raising the prospect that we could uncover other practices that invite scrutiny.
In the run-up to the Easter break there is a smattering of economic news in the form of the CBI’s monthly snapshot of the retail sector and the latest US GDP figures. The US economy is expected to have grown by 2.7% in the fourth quarter on an annualised basis, up from 2.5%. Jasper Lawler at London Capital Group said:In the run-up to the Easter break there is a smattering of economic news in the form of the CBI’s monthly snapshot of the retail sector and the latest US GDP figures. The US economy is expected to have grown by 2.7% in the fourth quarter on an annualised basis, up from 2.5%. Jasper Lawler at London Capital Group said:
The economic backdrop was supportive in the last quarter of 2017. Robust jobs growth and healthy consumer spending comfortably propped up the economy, which is expected to be reflected in an upwards revision for economic growth to 2.7% on an annualised basis from 2.5% in the previous estimate. The reading will not yet include the benefits from the tax cuts, nor the more recent uncertainties over global trade. However, given how quiet the economic calendar is, the reading is expected to attract attention anyway.The economic backdrop was supportive in the last quarter of 2017. Robust jobs growth and healthy consumer spending comfortably propped up the economy, which is expected to be reflected in an upwards revision for economic growth to 2.7% on an annualised basis from 2.5% in the previous estimate. The reading will not yet include the benefits from the tax cuts, nor the more recent uncertainties over global trade. However, given how quiet the economic calendar is, the reading is expected to attract attention anyway.
A surprise to the upside, could boost the possibility of a June rate hike up from the CME FedWatch odds of 78%, lifting the dollar back towards 90.00. On the contrary, should growth remain around 2.5%, we could see buying demand for the dollar decline and the greenback look to test 89.00 once more.A surprise to the upside, could boost the possibility of a June rate hike up from the CME FedWatch odds of 78%, lifting the dollar back towards 90.00. On the contrary, should growth remain around 2.5%, we could see buying demand for the dollar decline and the greenback look to test 89.00 once more.
The agenda:The agenda:
11.00 BST: CBI distributive trades survey11.00 BST: CBI distributive trades survey
13.30 BST: US fourth quarter GDP13.30 BST: US fourth quarter GDP