Financial market research and analysis

Wall Street finished mixed overnight, as financials and tech stocks lifted the S&P into positive territory, whilst the Dow closed less than 0.1% lower. Asian markets have since charged higher, with the positive sentiment transferring over to Europe where bourses are expected to lift on the open.

Tech shares are expected to be in demand on Tuesday following an impressive set of results from Google parent Alphabet. Reporting after the bell on Monday, shares jumped higher after the firm topped expectations for both earnings and revenue.

Earnings of $11.25 per share was well ahead of the $9.66 forecast, whilst earnings of $32.66 billion was significantly higher than the $25 billion expected, resulting in the share price surging over 4% in post market trading.

It wasn’t just the headline figures impressing traders, but also a surprise drop in costs reported by Alphabet. Costs had been increasing at a concerning rate over previous quarters as Alphabet played catch up in areas such as developing its cloud business and consumer business. These higher costs had been squeezing margins causing concern particularly among short term traders. Unexpectedly lower costs have eased these fears, boosting demand for the stock in the process.

Oil Extends Losses Overnight

Oil surged up to 2% higher early on Monday, lifted by Trump’s threats on Iran; however, over supply concerns quickly dominated market sentiment pulling oil 0.2% lower on the day. The big fear for oil traders is that Saudi Arabia and other large oil producers are ramping up production ahead of the November deadline to comply with US sanctions on Iranian oil, this comes at a time when concerns over demand are starting to rise owing to increased global trade tension; over supply and falling demand is not a good combination for the oil bulls.

Will Eurozone PMI’s be hit be trade tariffs?

With the ECB set to take its monetary policy decision later this week, the euro is under the spotlight as Eurozone PMI ‘s will be this morning, the last piece of evidence before the ECB meeting on Thursday.  Investors will be keen to see whether the slowdown registered in the first quarter is continuing. Recent data has shown an unevenness in eurozone economic growth and increased trade tensions are expected to have done more damage.

June’s manufacturing PMI was the weakest since January 2017, as it contracted for its 6th straight month as businesses expectations regarding future production deteriorated. July is expected to show a continuation of the same story, with the manufacturing pmi expected to decline to 54.7 from 54.9, whilst the composite pmi is expected to dip to 54.8 from 54.9 in June.

Weaker pmi readings might not come as such a surprise given that this will be the second straight month that factory supplies to the US have been restricted by US import tariffs on steel and aluminium, and the first month that the EU retaliatory tariffs will have made certain products more expensive to buy from the US.

June’s disappointing PMI’s sent the euro lower versus the dollar. Should July’s pmi figures surprise to the downside then we could expect to see Monday’s sell off in the euro extended.