Investors nervous after Facebook and Twitter declines and await interest rate news this week from UK, US and Japan
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Stock markets are expected to open lower after a tech sell-off on Wall Street at the end of last week. Investors are beginning to wonder if the relentless rise of the FAANG companies – Facebook, Amazon, Apple, Netflix and Google (now owned by Alphabet) – could be over.
European Opening Calls:#FTSE 7658 -0.57%#DAX 12794 -0.52%#CAC 5483 -0.52%#MIB 21806 -0.68%#IBEX 9795 -0.74%
The US session at the end of last week left traders digesting 4.1% yoy economic growth in the US in addition to another round of tech stocks reporting. After Facebook’s disappointing update and record breaking sell off, Twitter quickly followed suit. A beat in revenue but a drop off in user activity sent the stock plunging 12% on fears that the platform’s user growth could be limited.
Earnings season had set off to a good start, however tech stock headlines have quickly dominated, transforming perceptions and raising questions over valuations of FAANG stocks. With Netflix, Facebook and now Twitter disappointing with results, investors are seriously questioning these advertising revenues based or subscription-based models. On the other hand, Amazon beat earnings expectations comfortably, whilst Alphabet shrugged off a €5 billion fine. This original FAANG trade, which petty much guaranteed impressive returns across previous years, suddenly looks a lot more complicated. Whilst prior to the year these stocks could do no wrong, suddenly that is no longer the case.
It’s the turn of the Bank of Japan, US Federal Reserve and the Bank of England to guide on monetary policy, and while no surprises are expected from the FOMC, we could get some policy tweaks from the Bank of Japan after last week’s interventions in the JGB market. We could also get a rate rise from the Bank of England on Thursday when they meet to run the rule over the UK economy and the latest inflation report.