Downward pressure from poor results and weak consumer confidence
Fiona Cincotta July 31, 2012 5:20 PM
<p>European markets see little movement in early trading although downward pressure is being exerted due to poor second quarter results and weak consumer confidence. Investors […]</p>
European markets see little movement in early trading although downward pressure is being exerted due to poor second quarter results and weak consumer confidence. Investors are holding off any major changes to their portfolios as they look towards the start of the US Federal Reserve meeting for direction and the ECB meeting on Thursday.
It is widely expected that the Federal Reserve will hold off from implementing a new stimulus plan in order to get a better understanding of the outlook. Even so any hint at future action will help lift the market. Here in Europe it is expected that the ECB meeting on Thursday will resume its bond buying programme especially after the strong words from Draghi last week.
BP delivered the worst of a poor batch of quarterly results from oil companies this morning. Weaker oil and gas prices in addition to a reduction in output impacted on BP’s profits, which were reported to be a loss for the quarter of $1.4billion. The share price suffered accordingly, losing 3.3% in early trading as the oil company struggles under the weight of the litigation of the 2010 US Gulf spill and a row with its Russian partners. Such poor results really test the loyalty of investors and with BP warning there was still “significant uncertainty” relating to its US oil spill.
Scottish firm Weir also suffered at the hands of investors loosing 3.2% as they warned that full year profits were likely to come in lower than expected if there was no increase in the oil and Gas markets.
Across Europe the banking sector which has been under significant strain over the past few months, saw heavy weights report worst than expected results. Swiss bank UBS AG lost over 3% after its second quarter results were hit by a big loss from the Facebook IPO. Deutsche Bank also came in short of its forecast. Consequently Barclays and RBS were also heavy fallers loosing 2.2% in early trading.
Consumer confidence has also failed to pick up over the past year. Although the figure came in as excepted at -29, the fact that it has remained subdued further highlights the concerns over the economic outlook. Companies reporting so far this season have shown poor earnings growth which will do little to lift the mood especially combined with the prospect of continued austerity measures and problems in the Eurozone. Looking towards the afternoon a lack of domestic economic data means that investors focus will be completely on the Federal Reserve and ECB policy meetings and also the Consumer confidence in the US.
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