Next off the cliff?

Ipek Ozkardeskaya ipekScope

US and European markets took a breather yesterday, on the back of a two-day decline in oil prices thanks to the brief easing of Middle East tensions. That window offered a glimpse of the underlying market dynamic once the geopolitical noise was filtered out: the rotation.

Investors directed capital toward technology-light indices. The FTSE 100 outperformed most European indices despite falling oil prices, and closed the session just a few points below an all-time high. The Dow Jones Industrial Average outperformed its US peers with a 1% gain, while the tech-heavy Nasdaq 100 fell another 1%. The S&P 500 Equal Weight Index advanced to a fresh record high, while the market-cap-weighted version saw its upside capped by pressure on technology valuations.

Earnings Season is going well

On the micro front, the earnings season is going well for most US and European companies. European banks are following their US peers in announcing strong quarterly results (though a bit less impressive than those of their US counterparts, which is at times weighing on their share prices). Across the Atlantic, nearly a third of the S&P 500 companies have already reported results, and their earnings have grown by nearly 38% — well above the 23% growth rate pencilled in by analysts. Quite a surprise for a quarter that was marked by soaring energy prices!

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Author

Ipek Ozkardeskaya

ipekScope

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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