Global Stocks Lower On Earnings and Trade Fears

The FTSE tracked global stocks lower on renewed concerns over US – Sino relations and weaker earnings from Morgan Stanley. The UK index was faring worse than its European counterparts thanks to a stronger pound.

The pound extended gains versus the euro and the dollar, as Theresa May continues her cross-party talks. Jeremy Corbyn boycotted the talks demanding no deal Brexit to be taken off the table before he is open to discussion. Theresa May will must announce her Plan B on Monday. She has already delayed its discussion in Parliament until 29th January. Pound traders are aware of the size of the challenge that May faces and how quickly the clock is ticking. However, rightly or wrongly, this is not making traders as nervous as it would have just weeks earlier. 

US – Sino trade relationship under strain
As the US takes aim at Huawei, trade concerns returned to the market with vigour; investors are starting to question the progress made in the latest round of US – Sino talks which is hitting sentiment. The markets are fully aware that this latest move by the US could jeopardise the fragile relationship between the US and China. As a result, risk sentiment is falling, denting demand for riskier assets. China is unlikely to take this lying down; some form of retaliation is expected and that is making the market nervous.

Morgan Stanley disappoints
Also hitting on sentiment was weaker that forecast earnings from Morgan Stanley. Shares in the investment bank sunk 5% as it blamed tough market conditions for its quarterly loss. With investors unable to shake off fears of an economic slowdown, there is heightened sensitivity to weaker earnings data.

Netflix reports at 9pm
US earning season will remain in focus with Netflix reporting after the closing bell. As the first of the Faangs to update the market, investors will be watching very closely. Faang results usually have a keen audience and this time round will be no different. In fact, we are expecting even more interest than usual, given the strong sell off in tech stocks at the end of last year. 

Hopes are high that Q4 results will echo a strong Q3. Streaming revenue is expected to have increased by 36% whilst paid membership numbers are expected to have pushed through 130 million. Netflix’s share price has rallied well over 30% since its recent low on Christmas eve. Investors will want to see figures that support such a rally.