Financial market research and analysis

Wall Street experienced a late rally as a trade war ceasefire declared by the EU and the US boosted market sentiment. The S&P rallied to close at its highest level in almost 6 months as trade war fears de-escalated, tariffs were suspended and as trade negotiations begin to bring tariffs and trade barriers to an end.

This was the best outcome that could have been expected from the meeting. The market was cautious approaching the summit and even further talks were looking doubtful. Yet the EU cutting tariffs and promising to buy “a lot more” soybeans has been sufficient to avert a trade war, for now. Who knew Mr Juncker could be so quick to make a trade pact when he wants to!

The euro rallied hard versus the weaker US dollar, with risk easing, demand for the safe haven dollar declined, and investors sought the higher yielding euro. EUR/USD jumped over 0.4% late on Wednesday, passing through $1.17 and is continuing to climb in the Asian session.

ECB meeting to boost euro?

Whether or not the euro bulls can find the strength to pull the common currency out of its recent range ($1.15 - $1.1850), will now depend on what the ECB will say later today. No change in monetary policy is expected and the meeting could be rather uneventful given the unexpected announcement in June regarding the conclusion of QE and the dovish change in forward guidance that accompanied it. A reiteration of the dovish message could, in fact, send the euro right back towards $1.17, giving back all the gains from Wednesday.

European bourses are looking to extend the gains from the US session, with the Dax a clear and unsurprising winner. With the most to lose in a trade war with the US aimed at automobiles, the easing of trade tensions has put the Dax in line for a 1% rally out of the blocks on the open.

Facebook set for biggest one day sell-off

Facebook reported after the close and failed to live up to the high expectations. Following Alphabet’s beat on all metrics, it was a tough act to follow, which made Facebook’s miss on revenue and some other figures all the more noticeable and concerning, sending the stock 20% lower in after-hours trading.

Whilst Facebook beat on earnings and missed on revenue, it wasn’t just the headline figure that caused the plunging share price, other figures, such as the number of users also missed estimates, as did the average time spent on Facebook. With digital advertising sales also down Facebook is seen paying the price for the Cambridge Analytica Scandal. This combined with news earlier on Wednesday that China removed permission for Facebook to set up a subsidiary in China, plus a less than encouraging outlook has left investors in panic mode

Facebook to drag FAANG’s lower?

Facebook is expected to see its biggest one day sell off when it opens later today. The big question will be whether it will bring down the rest of the FAANG stock? The Nasdaq futures are currently trading over 1% lower despite the Nasdaq hitting a fresh all-time high in trading overnight. Whilst we expect Facebooks results have a short-term impact on FAANG stock, it’s more likely that we will start to see a de-coupling of Facebook from the group.

Facebook is investing a huge amount into staff and technology to address concerns raised through its recent data scandals. This same technology could help it in its mission in China. If and when that does pull off, Facebook will be on a roll again, however, in the meantime, Facebook could fall behind its peers.

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