Downward pressure from poor results and weak consumer confidence

<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.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.