Comment: Markets Anxious On Geopolitical Tensions; Eyes Shift To US Earnings Season
April 8, 2014 6:21 am
European equities pare early session gains to trade lower Tuesday, pressured by fresh geopolitical drama together with declines on Wall Street overnight where tech stocks continued their descent amid worries about inflated valuations – Amazon, Facebook, Twitter and LinkedIn all registered fat losses. European tech shares fell sharply in the previous session as the declines in the sector over in the US spread across the global sector – this morning however, tech shares in Europe are in for a little respite; ARM Holdings in London is amongst one of the biggest risers on the FTSE100 index. That said, traders are still anxious on the whole in Europe, refraining from building risk-exposure.
Geopolitical tensions are on the rise again after pro-Russian demonstrators seized government buildings in three Ukrainian cities with rebels now declaring independence in the Donetsk region. The US responds by warning Russia over destabilisation in Ukraine – markets again are on edge as this fresh escalation of the crisis could see further turbulence in financial markets and more worrying, this crisis is now become a protracted affair which stands further dent the West’s relations with Russia to the point where the damage could be irreparable for some time.
Across other asset classes, USD remained largely steady after the Bank of Japan kept monetary policies unchanged while the euro edges higher, back up to the 1.37 level despite talk of an ECB bazooka in recent days. BOJ maintained policies and kept an upbeat assessment in the first policy meeting by the central bank since the introduction of the increased sales tax in Japan – traders have expressed concerns that the sales tax increase could discourage consumption, weighing on domestic demand which could in turn derail the Japanese economy.
That said, all of this means that market participants are convinced that the BOJ will have to expand its stimulus measures even more aggressively even if BOJ chief Kuroda showed reluctance over further stimulus at the press concurrence. Kuroda instead said that he believes the Japanese economy will rebound in the summer, shaking off the negative effects of the increased sales tax in the current quarter. The yen jumped a touch following Kuroda’s comments amid diminishing prospects of further stimulus measures in the near-term.
Closer to home, there’s little on the macro agenda out of the euro zone but the UK’s manufacturing and industrial output releases are likely to garner some attention ahead of the Bank of England’s policy meeting on Thursday. In the US later, we will see the release of Alcoa’s earnings after the closing bell in New York with consensus EPS at around $0.05 and consensus revenue of $5.57b for the Q1 – note that Alcoa was last year kicked out of the DOW but it’s earnings release still heralds the start of the reporting season.
Alcoa’s eviction from the DOW followed growing concerns about the company’s poor earnings outlook which worried the market however since then, management are attempting to turn the business around by investing $575million to expand production to meet the needs of the auto industry and that are projecting the use of aluminium in auto parts to double by 2025. That said, the market is still somewhat sceptical about the company as the balance sheet will most certainly suffer from costs related to restructuring, closing plants and laying off workers. This week also sees banking giants JPMorgan and Wells Fargo line up to release numbers.
European equities pare early session gains to trade lower Tuesday, pressured by fresh geopolitical drama together with declines on Wall Street overnight where tech stocks continued their descent amid worries about inflated valuations – Amazon, Facebook, Twitter and LinkedIn all registered fat losses. European tech shares fell sharply in the previous session as the declines in the sector over in the US spread across the global sector – this morning however, tech shares in Europe are in for a little respite; ARM Holdings in London is amongst one of the biggest risers on the FTSE100 index. That said, traders are still anxious on the whole in Europe, refraining from building risk-exposure.
Geopolitical tensions are on the rise again after pro-Russian demonstrators seized government buildings in three Ukrainian cities with rebels now declaring independence in the Donetsk region. The US responds by warning Russia over destabilisation in Ukraine – markets again are on edge as this fresh escalation of the crisis could see further turbulence in financial markets and more worrying, this crisis is now become a protracted affair which stands further dent the West’s relations with Russia to the point where the damage could be irreparable for some time.
Across other asset classes, USD remained largely steady after the Bank of Japan kept monetary policies unchanged while the euro edges higher, back up to the 1.37 level despite talk of an ECB bazooka in recent days. BOJ maintained policies and kept an upbeat assessment in the first policy meeting by the central bank since the introduction of the increased sales tax in Japan – traders have expressed concerns that the sales tax increase could discourage consumption, weighing on domestic demand which could in turn derail the Japanese economy.
That said, all of this means that market participants are convinced that the BOJ will have to expand its stimulus measures even more aggressively even if BOJ chief Kuroda showed reluctance over further stimulus at the press concurrence. Kuroda instead said that he believes the Japanese economy will rebound in the summer, shaking off the negative effects of the increased sales tax in the current quarter. The yen jumped a touch following Kuroda’s comments amid diminishing prospects of further stimulus measures in the near-term.
Closer to home, there’s little on the macro agenda out of the euro zone but the UK’s manufacturing and industrial output releases are likely to garner some attention ahead of the Bank of England’s policy meeting on Thursday. In the US later, we will see the release of Alcoa’s earnings after the closing bell in New York with consensus EPS at around $0.05 and consensus revenue of $5.57b for the Q1 – note that Alcoa was last year kicked out of the DOW but it’s earnings release still heralds the start of the reporting season.
Alcoa’s eviction from the DOW followed growing concerns about the company’s poor earnings outlook which worried the market however since then, management are attempting to turn the business around by investing $575million to expand production to meet the needs of the auto industry and that are projecting the use of aluminium in auto parts to double by 2025. That said, the market is still somewhat sceptical about the company as the balance sheet will most certainly suffer from costs related to restructuring, closing plants and laying off workers. This week also sees banking giants JPMorgan and Wells Fargo line up to release numbers.
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