European equity markets continue to chip away at last week’s gains, as the mantra of selling the bounce continues to be the strategy of choice for traders. The temptation to reduce risk as the FTSE 100 at above 6000 has proven to be too attractive, as once again the index has lost its nerve.
Although Chinese equities had a healthy bounce overnight, the volatility in the Shenzhen‘s price action this year ensures that it will take more than one good session to pull the bulls back in. Macro events might have been the leading driver for the FTSE so far this year, but BP’s profits collapsing has been the catalyst this morning causing the share price to drop by 6.5% in the first few minutes.
Sentiment towards Shell has also been dented, and the two oil majors between them accounted for 55% of the FTSE’s fall. Sainsbury’s made a bid consisting of both cash and shares equating to 161p or £1.3 billion for Home Retail Group, the parent company for Argos, and this package has been enough to push through the deal just before the deadline. This acquisition offers the food retailer an impressive delivery infrastructure in the battle to grab an increasing share of the growing online market.
Remaining with food retail distribution, Ocado has managed to post a second year of profits, up 65% year-on-year to £11.9 million, no doubt giving speculators even more reason to believe that the Amazon interest might turn into something more substantial.
Last night’s results to choose US presidential candidates dealt Republican Donald Trump a blow, as the chances of him becoming the next president fell from 22% down to 12% on the IG digital 100s binary. Although Hillary Clinton had to share the votes in Iowa’s Democratic voting, IG’s US presidential digital 100 still gives her a 55% chance of becoming the first female US president.
The big name US corporate blue chips continue to fire out fourth-quarter updates and today is the turn of Pfizer, Yahoo, Dow Chemical Co and Exxon Mobil among others. Interestingly in this reporting season, 78% of S&P 500 companies that have posted fourth-quarter figures have seen better-than-expected earnings per share, however only 48% have posted better-than-expected sales.
Ahead of the open, we expect the Dow Jones to start 134 points lower, at 16,315.