European update – US earnings fail to lift stocks

Market bounce quickly fades after encouraging earnings

We’re seeing another mixed session in Europe on Wednesday, with stocks here and in Asia clearly not encouraged by the earnings reports in the US that prompted a record close in the S&P 500 and NASDAQ.

Source – Thomson Reuters Eikon

In an otherwise quiet week and at a time when central banks have become much more dovish in response to a more downbeat assessment of the economic outlook, this seasons earnings reports are all the more important. Especially as a driver for market sentiment. So far, investors have reason to be encouraged but it’s worth noting that expectations heading in were low.

Even on the back of a good batch of earnings and record closing levels in US indices, futures on Wall Street are pointing to a slightly negative open which suggests the optimism is somewhat limited. Perhaps investors are nervous around the current levels or they aren’t hopeful that it’s reflective of the overall reporting season and that on average it will revert closer to prior expectations. We’ll have to wait and see.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.