FTSE and Nasdaq miss out on Trump Juncker rally

European stocks surged on Thursday, lifted by easing US – EU trade tensions following successful trade talks between President Trump and EU Commission President Jean-Claude Juncker. However, FTSE didn’t join the party and moved lower across most of the session. The Nasdaq was another noticeable absentee from the rally following Facebook’s grim outlook, whilst the S&P edged higher and the Dow soared on reduced trade war fears.

Shell misses the mark
Oil majors and real estate have been the principal drags on the FTSE. Shell topped the FTSE loser board, plunging 3.7% despite posting a 37% rise in underlying earnings and announcing a $25 million share buyback programme. These results of Shell’s impressive cost cutting programme and a rebounding oil price are seeing the firm press ahead with the long-awaited share buyback programme, even though the earnings missed expectations of $5.9 billion at $4.7 billion. 

The results are impressive away from the top line, cash flow is at the highest level since 2014, net debt down 9% and Shell’s 20% gearing target is now in sight; Shell appears to be much more orderly since its troubled days of 2015/6. This looks like an overreaction by investors who are particularly irked by Shell’s decision to not hike the dividend.  Expectations were high going into the release, but the top line miss sits mainly with a troublesome FX transaction rather than anything more serious. Expectations for the sector as a whole are high, we expect Shell to bounce back from this relatively quickly.

Facebook dives in worst trading day ever
Any optimism from the easing trade war tensions had quickly been erased by tanking Facebook shares, which have dragged the Nasdaq 1% lower. Facebook was in freefall as it opened for trading followings its results after the bell last night. 

As daily active users fell short of expectations and Facebook warned that revenue growth would slow for the rest of the year investors have reacted, panic selling and putting the stock in line for its worst day ever. There is no doubt that this is a serious reset to a stock which prior to this year could do little wrong. There are clearly some core issues which Facebook is working on that the market had been ready to price over; shares have rallied over 40% since the Cambridge Analytica scandal. The startling outlook from Facebook is bringing these core issues back to the foreground and the price back to reality as a result.