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MARKET COMMENT: US Stocks Seen Lower As Amazon Losses Hit Sentiment(Alliance News Via Acquire Media NewsEdge) LONDON (Alliance News) - US stock markets are set to follow their UK and European counterparts lower Friday, with potentially stretched stock valuations back in focus after Amazon.com reported disappointing second quarter results after the closing bell on Thursday. Although the S&P 500 touched a record intraday high Thursday of 1,991.39, US markets struggled to make any significant ground and closed broadly flat. Wall Street is looking set to start with a more negative bias Friday, with the DJIA and the S&P 50 futures both pointing down about 0.2%, while the Nasdaq Composite is pointing down almost 0.4%. Online retail giant Amazon.com gave investors cause for concern by reporting a loss of USD126 million in the second quarter, up from a loss of USD7 million a year earlier. Even worse for Amazon investors was a projected third quarter loss of as much as USD810 million. Given that Amazon trades on a price-to-earnings-ratio in the region of 900x, it's likely to be one of the stocks that Fed Chair Janet Yellen was referring to last week when she said that some valuations look "stretched". The stock price plunged in after-hours trade and looks set to open more than 10% lower. "Amazon is a stock in the public's eye and tends to drive perception on overall earnings for the quarter and as such is likely to act as a drag on the forthcoming session," said CMC Markets market analyst Jasper Lawler. 21st Century Fox and Time Warner also will be back in focus Friday, following the confirmation from British Sky Broadcasting before the start of London trading that it has bought Fox's stake in Sky Italia and Sky Deutschland for a total of GBP4.9 billion in cash, plus BSkyB's 21% stake in the National Geographic Channel. Rupert Murdoch's 21st Century Fox is widely expected to use the cash to make an increased takeover offer for Time Warner. Following its recent acquisition of Shire, AbbVie will be another focus of attention Friday, having just released its second-quarter numbers. US President Barack Obama gave a dressing down to companies such as AbbVie in an interview with CNBC on Thursday, saying "if you're simply changing your mailing address to avoid paying taxes, you're really not doing right by the country." Obama did acknowledge, however, that it will an actual change in the law to stop the growing trend of US names buying overseas companies to take advantage of a lower overseas tax rate. European markets are continuing lower into the US open, following a big drop in the German IFO business climate survey earlier in the session, while UK indices have also given up any early gains despite GDP data that showed UK economic output has reached its pre-recession peak. Ahead of the US opening bell, the FTSE 100 is down 0.1% at 6,816.26, the FTSE 250 is down 0.2% at 15,717.52, and the AIM All-Share is flat at 773.29. In Europe, the German DAX 30 is down 0.5%, and the French CAC 40 is down 0.7%. "Clearly (German) businesses are suffering as a result of the weakening trade ties with Russia, which has had sanctions imposed on it by Europe and the US due to its involvement in the crisis in eastern Ukraine," says Aplari market analyst Craig Erlam. The Russian central bank surprised the market earlier Friday by hiking its key interest rate by half a percentage point, taking it to 8.0%, as it attempts to halt the declining value of the ruble. It's the third time this year that Russia has raised interest rates, and with more sanctions expected to be announced by the EU against Russian individuals and organisations in the coming days, it seems President Putin's government is beginning to pay an economic price for its aggression against Ukraine. The conflict between Israel and Hamas has continued to intensify, with the violence now having spread to the West Bank, where two Palestinians were killed last night, taking the overall death toll above 820, intensifying pressure on US Secretary of State John Kerry to broker a ceasefire. The only release of note in the US data calendar Friday is US durable goods orders at 1330 BST. Orders are expected to have increased by 0.5% in June, partially reversing the 1.0% fall in May. Copyright 2014 Alliance News Limited. All Rights Reserved. |