Financial market research and analysis

Tuesday saw markets strike a distinctly softer tone. In Europe worries were creeping in about the walking back of central bank stimulus while in the US another downturn in technology stocks muddied the bullish waters.

A record-breaking fine for Google by Europe’s competition regulator saw parent company Alphabet lead an opening decline in US stocks. The Google fine is another reason to cast doubt over the sustainability of sky-high valuations within the technology sector. A downgrade to US growth forecasts by the IMF and talk of more US military intervention in Syria buttressed the weaker sentiment.

The Nasdaq index had already undergone a late reversal on Monday. It looks as if traders in tech stocks bottled it after having held on since the dramatic price crash on June 9.

The euro jumped and European stocks fell after the ECB’s top dog Mario Draghi offered the first inclination that central bank stimulus could soon be wound in. Concern rates could be headed higher quicker than previously thought hurt the shares of Europe’s debt-heavy utility firms. The magic word in the world of central banks right now is ‘transitory’. The notable switch in Draghi’s speech was using ‘transitory’ to describe global factors that have been pulling inflation lower, rather than the oil price recovery which has been adding to price pressures..

In the UK, the FTSE stumbled near critical price support at 7400. Banks were amongst the top performers after the Bank of England raised counter-cyclical capital requirements as expected. Mining companies were also top gainers thank to a rise in metal prices and a fourth daily gain in the price of oil.

Marks and Spencer shares dropped after rival Debenhams reported a drop in like-for-like sales and warned on full-year profits. Kantar data showing UK grocery sales rising, in part thanks to higher inflation helped Tesco shares nudge higher. Sainsbury’s shares were lef little changed. Sainsbury’s is split between the good news from Kantar and bad news from Debenhams now that it owns Argos.

Although dollar weakness played its part, the pound also garnered some political support from the SNP. Scottish National Party leader Nicola Sturgeon said her party won’t call for a new Scottish independence referendum at least until terms of Brexit are clear.

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