Poor earnings from Google and Aggreko damage market sentiment
Fiona Cincotta October 19, 2012 10:06 PM
<p>European markets steadily declined on Friday, snapping a four-day winning streak. Investors carefully digested the latest round of earnings on both sides of the Atlantic […]</p>
European markets steadily declined on Friday, snapping a four-day winning streak. Investors carefully digested the latest round of earnings on both sides of the Atlantic and also looked towards the final day of the EU summit for developments.
Although expectations for the EU summit have been fairly low, with 22 summits since problems intensified in Greece in late 2009 and four summits so far this year, the actual lack of significant development meant the markets lacked the drive to push higher.
The situation in Europe still sits at a critical junction. Some progress was made, with a deadline being set to agree on a legislative framework for a single supervisory mechanism; however, there is still a lot of work and negotiation to be done on this political development.
Crucially there was little word regarding Spain, whose regional elections this Sunday had provided a key date which the markets had looked to for a formal bailout request. However with a successful bond auction yesterday and with the bench mark 10-year bond yield at a slightly more sustainable level of 5.37%, a request for aid could still be some way off. Spanish Prime Minister Rajoy confirmed this by saying there was no pressure to seek aid.
So with few new measures in Europe, investors focused instead on disappointing earnings from Google in the US in the previous session and a poor update by Aggreko in the UK this morning.
Aggreko topped the list of fallers on the FTSE 100, down 7.7% in high trading volumes after it downgraded its 2012 profit outlook due to provisions for bad debt and adverse exchange rates. It also stated that capital expenditure in the first half of 2013 will be below that of 2012 as a result of the weakening economic outlook in many of its markets. Despite the negative outlook, Charles Stanley suggested that a possible downgrade was on the horizon.
Meanwhile technology stocks across Europe felt the knock on effect of Google’s poor performance, with the US bellwether massively missing analyst expectations yesterday and dropping 8%. It has failed to regain lost ground today as further disappointing numbers come in from the US, worrying investors and preventing any positive movements in European markets in the short term.
The FTSE ended the final session of the week down 0.36%, whilst the DAX and CAX both shed over 0.9%.
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