Financial market research and analysis

Another day of rallying equities with 95 out of the 101 stocks all capturing gains this morning on the FTSE100. All sectors are in the green, with materials and energy leading gains in London despite a mixed picture on oil and commodities complex. The financial sector is higher but underperforming the broader index. Healthcare and industrial sector are lacking momentum for the time being.

Pearson (+4.80%) is leading gains despite announcing a 2% fall in 2015 sales. Company said that VUE, Connections Education and Wall Street English gained enough traction in China to offset the declining revenues in the US, the UK and South Africa.

RBS (-7.8%) reported, as expected, a fairly hefty loss of £1.98bn for 2015, its eighth year of annual losses. £3.6bn for litigation costs, including £600m to cover claims over the mis-selling of payment protection insurance continues to haunt the bank and the fact that lower interest rates will be here for the foreseeable future would imply that underlying profits will continue be hurt.

HSBC (1.83%) recruiting Matthew Westerman (ex Goldman Sachs) is clearly seen by investors as a clue that the bank is making successful inroads in boosting its investment bank and reinforcing its focus on corporate clients with a reorganisation of the division, which it calls global banking and markets.

IAG (-1.43%) British Airways and Iberia's parent company IAG saw a 64% rise in yearly pre-tax profits to €1.8bn (£1.4bn), with lower fuel prices helping the upside.
Fuel costs were down 6.3%, and would have been 17.2% lower, but for a rise in the value of the dollar.


Japanese inflation remained flat.

The inflation in Japan remained 0.0% in January, leaving the BoJ far behind its policy target of 2%. BoJ’s Kuroda said it is possible to push interest rates to more negative levels and that his policy will not be constrained by criticism from the US presidential candidates. The USDJPY traded ranged between 112.56/113.22 as traders remain sceptical on the efficiency of additional stimulus.


IMF Lagarde: G20 policymakers should go bold, go broad and go together

The scepticism against the central bank policies go well beyond the BoJ’s. It has been nearly eight years that the central banks flirt with zero/negative rate policies and venture with massive balance sheet expansions due to colossal bond purchases (so named the QE).

There is an abundance of G20 officials speaking on the news wires. The global financial turmoil and the risk of recession are on the menu. IMF’s Lagarde said ‘policymakers should go bold, go bold and go together.’

BoE Governor Carney warned that negative interest rate policies could prove to be a zero-sum game, that the global economy risks are becoming trapped in low-growth, low-inflation, low-rate equilibrium, that it would be wrong to say central banks are out of ammunition, fundamentals must improve.’

The US data will be in focus before the weekly closing bell. The US dollar is slightly weaker against the G10 complex this morning on fears that the US GDP growth may have slowed to 0.4% in Q4 (annualised q/q). Some US officials remain positive. Fed’s Bullard said the probability of US recession is not high, while adding that the Fed hike may have spurred the market turmoil. From a more hawkish perspective, Fed’s Williams commented that the Fed should gradually up rates, never mind how many.

The market currently gives 10% probability for a March Fed rate hike.