European markets were mixed in early trading on Thursday following a balanced statement from the Federal Reserve, which opted to keep US interest rates unchanged. With the Fed on the sidelines, earnings are front and centre. From a central bank perspective, focus in markets has now shifted to the Bank of Japan, which could add further stimulus Friday morning.
The FTSE 100 was dragged slightly lower after shares of Royal Dutch Shell (LON:RDSa) and Lloyds (LON:LLOY) bank slumped following quarterly earnings reports. Losses were limited by well-received results from Rolls Royce (LON:RR) and telecoms rivals BT and Sky.
The euro was higher after data showed a bigger than expected fall in German unemployment and a rise in economic confidence. The rise in the euro was supported by a fall the US dollar since the release of the Federal Reserve statement. The Fed acknowledged an improvement in the US labour market but unexpectedly tempered it by saying it continues to monitor global risks, offering a more dovish tone and causing an unwind of bullish dollar positions.
Shares of Lloyds dropped as the bank warned it was preparing for lower interest rates and an uncertain outlook for the UK economy. Lloyds earned double it first quarter pre-tax profits whilst CEO Antonio Hotra-Osorio announced 3000 job cuts and the closure of 200 branches in response to a drop in usage by customers. The uncertainty makes it unlikely the Lloyds share price can recover enough in the near term for the British government to be able to offload the rest of its stake, reducing scope for another special dividend.
US stocks look set for a higher open with the NASDAQ leading the gains thanks to another huge quarter for Facebook (NASDAQ:FB), which is expected to send shares soaring to a new record high.
Facebook has cracked the mobile advertising model and advertisers are flocking to the social network to take advantage. Advertising revenue rose by 63% y/y in the second quarter with 84% of it coming from mobile. Even if tepid global growth reduces advertising spend, online ad spending will likely increase and poor results from Twitter (NYSE:TWTR) and Yahoo! (NASDAQ:YHOO) suggest Facebook, along with Alphabet (NASDAQ:GOOGL), is claiming the bulk of it.
USA pre-opening levels
S&P 500: 4 points higher at 2,170
Dow Jones: 25 points higher at 18,497
Nasdaq 100: 17 points higher at 4,719
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