Overnight losses in Asian markets sparked by a loss of momentum on Wall Street weighs on European prices this morning together with a damp set of earnings from leading blue-chips in the region. In the US Wednesday, stock markets pared gains despite the US policymakers agreeing on lifting the debt ceiling until March 2015 as well as Janet Yellen, the Fed’s new head, reaffirming the central bank’s current monetary policies. The loss of momentum in the US comes after strength earlier this week for Wall Street; traders were tempted to book profits ahead of crucial US data later such as retail sales and Yellen’s testimony to Senate. In Asia overnight, the risk-tone evaporated as traders took their cue from the profit booking action in the US with an ugly Australian jobs number denting sentiment. Aussie jobless rate rose to a decade high of 6% in January, pressuring the ASX200 index.
Here in Europe this morning, equity markets are losing steam like global peers with disappointing earnings and downbeat corporate news doing little to help sentiment. Lloyds Banking Group may have swung back into profit but pre-tax statutory profit of £415m for 2013 was slightly weaker than expected, the $1.8bn for PPI which racks up the total for scandals at £10b together with guiding lower for 2014 leaves investors feeling less than impressed. CEO Horta-Osorio received a £1.7m bonus for his efforts to bring the bank into profitability but at a time when bankers bonuses is a controversial subject, the bank will remain under public and political scrutiny. UK government needs to get rid of Lloyds stake before election in 2015 so this year will prove testing for Lloyds. Although it’s welcome the bank has churned out a profit, there remains plenty of work to do in regards to deleveraging, reshaping the balance sheet and cutting costs at the bank together with settling litigation scandals before the bank will be ready for privatization. Another bank hit by a big legal provision, as the industry struggles to put the mistakes of its past behind it.
Elsewhere, France’s BNP Paribas has been hit by scandal as it sets aside a whopping $1.1bn in Q4 due to an investigation into payments which could be considered impermissible under US laws and regulations. That number could change too as it is yet to be approved by US regulators; the hefty size of the sum set aside threatens to eat away at profitability at the French bank following an already weak set of Q4 numbers in which net income slid more than 75% and revenues only rose 2%. Meanwhile, aerospace and defence giant Rolls-Royce shares take a hit after the company said it could face prosecution over an investigation by the UK SFO into possible corruption in overseas markets. The company is under investigation over bribery allegations in Indonesia and China which resulted authorities arrested two men in connection with scandal – both men do not work for RR but are related to the probe. Until more clarity over this scandal and the cost that RR will have to take if legal action is taken, expect an overhang in the share price. What’s more, Rolls-Royce warns on profits this morning saying earnings this year will be flat for the first time in a decade as US defence cuts eat into its military aerospace engine orders.
Overnight losses in Asian markets sparked by a loss of momentum on Wall Street weighs on European prices this morning together with a damp set of earnings from leading blue-chips in the region. In the US Wednesday, stock markets pared gains despite the US policymakers agreeing on lifting the debt ceiling until March 2015 as well as Janet Yellen, the Fed’s new head, reaffirming the central bank’s current monetary policies. The loss of momentum in the US comes after strength earlier this week for Wall Street; traders were tempted to book profits ahead of crucial US data later such as retail sales and Yellen’s testimony to Senate. In Asia overnight, the risk-tone evaporated as traders took their cue from the profit booking action in the US with an ugly Australian jobs number denting sentiment. Aussie jobless rate rose to a decade high of 6% in January, pressuring the ASX200 index.
Here in Europe this morning, equity markets are losing steam like global peers with disappointing earnings and downbeat corporate news doing little to help sentiment. Lloyds Banking Group may have swung back into profit but pre-tax statutory profit of £415m for 2013 was slightly weaker than expected, the $1.8bn for PPI which racks up the total for scandals at £10b together with guiding lower for 2014 leaves investors feeling less than impressed. CEO Horta-Osorio received a £1.7m bonus for his efforts to bring the bank into profitability but at a time when bankers bonuses is a controversial subject, the bank will remain under public and political scrutiny. UK government needs to get rid of Lloyds stake before election in 2015 so this year will prove testing for Lloyds. Although it’s welcome the bank has churned out a profit, there remains plenty of work to do in regards to deleveraging, reshaping the balance sheet and cutting costs at the bank together with settling litigation scandals before the bank will be ready for privatization. Another bank hit by a big legal provision, as the industry struggles to put the mistakes of its past behind it.
Elsewhere, France’s BNP Paribas has been hit by scandal as it sets aside a whopping $1.1bn in Q4 due to an investigation into payments which could be considered impermissible under US laws and regulations. That number could change too as it is yet to be approved by US regulators; the hefty size of the sum set aside threatens to eat away at profitability at the French bank following an already weak set of Q4 numbers in which net income slid more than 75% and revenues only rose 2%. Meanwhile, aerospace and defence giant Rolls-Royce shares take a hit after the company said it could face prosecution over an investigation by the UK SFO into possible corruption in overseas markets. The company is under investigation over bribery allegations in Indonesia and China which resulted authorities arrested two men in connection with scandal – both men do not work for RR but are related to the probe. Until more clarity over this scandal and the cost that RR will have to take if legal action is taken, expect an overhang in the share price. What’s more, Rolls-Royce warns on profits this morning saying earnings this year will be flat for the first time in a decade as US defence cuts eat into its military aerospace engine orders.
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