After an initial positive open, the European markets are turning lower as they digest some unsettling news including: fighting talk from the Greek PM who said that the Greek government is going to re-negotiate debt relief and relieve austerity. While he said that Greece would not default, the Germans have appeared reluctant to give Greece any concessions. Greek bond yields have climbed back above 10% today, their highest level since 9th Jan, suggesting that fears over Greece’s repayment schedule are mounting and could spread to other asset classes.
The other concern is Russia, as EU foreign ministers threaten more sanctions. They will discuss the possibility today, and an agreement could be made on 12th Feb. This could impact European market sentiment in 2 ways; 1, it would hurt European exporters who do business with Russia, 2, these talks could highlight divisions within the EU. Greece has already said that it does not support sanctions on Russia, and other Baltic and Southern European states could follow suit.
After strong gains in European markets in recent weeks, these concerns could trigger some profit-taking.
Corporate news:
Apple had a storming 2014, reporting the largest quarterly profit in history, surpassing a title formerly held by Exxon Mobil. Since 2007 it has shipped 1 bn iPhones. Apple’s share price dropped in late trading on Tuesday, but US futures point to a higher open today. Apple’s biggest problem is how to keep the momentum going in the future. A lot is resting on the iWatch, released in April.
ARM holdings is one of the top performers on the FTSE, it supplies chips to Apple, and the surge in iPhone demand is reflecting well on this stock.
But the good news is not universal. US corporates including Caterpillar, Dupont, Microsoft and Proctor& Gamble have all complained that a strong dollar has weighed on overseas earnings. It will be interesting to see if domestic retailers and car manufacturers can reap the benefits of the decline in the oil price. Earnings from Ford, Time Warner, Coach and JetBlue Airways, all due to release earnings later this week, will be a good gauge of the strength of consumer sentiment in the US.
Key earnings releases to watch out for today/ Thursday:
US – Wednesday:
Facebook – after the market closes. A good gauge of corporate sentiment, due to the company’s reliance on ad revenue. After Apple’s bombastic results, expectations are high.
Boeing – 1230 GMT – will the oil price boost Boeing?
UK- Thursday:
- Diageo – Before market opens – weak growth in Europe could weigh on sales.
UK – Friday:
BT Group – before the market opens, could hear more about BT’s foray into mobile.
Next week sees some key earnings releases from the UK including: BP, Ocado, Sky, GlaxoSmtihKline, and Hargreaves Lansdown. In the US, Exxon Mobil, Wendy’s, New York Times, Chipotle, Walt Disney, Merck, General Motors and Ford are the highlights.
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