Poor earnings from Google and Aggreko damage market sentiment

<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%.

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.