Today's Financial News Courtesy of the Financial Times

Today's Financial News Courtesy of the Financial Times

Investors digest welter of news ahead of more earnings
By Jamie Chisholm, Global Markets Commentator
Copyright The Financial Times Limited 2010
Published: July 16 2010 08:35 | Last updated: July 16 2010 10:08
http://www.ft.com/cms/s/0/1664f3e6-9098-11df-85a7-00144feab49a.html


Friday 10:00 BST. Unsure: that seems to sum up traders as they struggle to absorb a plethora of conflicting corporate and economic stimulants.

The FTSE All-Word equity index is down 0.1 per cent, the dollar has halted its slide and core bond yields are little changed. US equity futures are down 0.4 per cent.

The catalysts have come so fast and furious over the past 24 hours that it may be beneficial to provide a checklist for frazzled investors.

First, lets tackle the microeconomic. The US earnings season, on which many bulls have pinned their hopes for a further rally, had got off to a good start with Alcoa and Intel. But Thursday’s numbers left cause for concern.

Google’s earnings after the bell have been poorly received, knocking sentiment towards technology stocks in Asia on Friday.

JPMorgan was the first of the big banks to step up to the plate and the initial headline beat was welcomed. But analysts were less enamoured after more sober reflection and it will be interesting to see the reaction to the Bank of America and Citigroup reports out later today.

Helping the sector, however, was news that Goldman Sachs had made a settlement with US regulators relating to charges that it misled investors in a mortgage-backed security deal. Goldman shares soared on hopes that the $550m fine meant costs could now be quantified and a line drawn under the episode.

The same rationale may be applied to the passing, at last, of the US financial services bill. The removal of uncertainty is usually welcomed by the market.

Finally for the micro, BP shares have received a boost on news that it has stopped the Gulf of Mexico leak. Hopes that exploration activity can return to “normal” may provide support to the energy sector.

Plugging the leak may also have a beneficial macroeconomic impact on the Gulf region. But unfortunately that’s where the good macro news ends.

A batch of worryingly soft data on Thursday joined other recent downbeat surveys on retail and cautious comments from the Federal Reserve to paint the picture of a US economy struggling for traction and showing deflationary signs. News that China’s rampant growth is cooling a touch added to the caution.

Still, the specific company news on Goldman and BP was sufficient to help Wall Street pare its macro-induced losses and finish flat on the day.

But traders know such one-off company specific bounces are unlikely to trump the macro for long.

☼ Factors to Watch. With this in mind, the July Michigan consumer confidence report data out later may carry added heft. Similarly, increasing fears of deflation mean the June US consumer prices data has the potential to deliver some pain if core inflation is much softer than expected.

General Electric will reveal its second-quarter results before the opening bell. ☼

● Asia. The Nikkei 225 in Tokyo has had a miserable end to the week, tumbling 2.9 per cent as a stronger yen hurt exporters. The Japanese currency has been the main beneficiary of the dollar’s sudden flop to 2-month lows as forex traders focus on US economic weakness rather than the buck’s erstwhile haven status. Tokyo will be shut for a holiday on Monday and investors are wary of getting caught out by any further climb in the yen over that period.

The FTSE Asia-Pacific index is down 0.9 per cent as growth concerns continue to stalk the region. Sydney lost 0.5 per cent, with uncertainty surrounding an imminent election adding to the cautious mood. Shanghai and Hong Kong rebounded off lows, however, to both close flat.

● Europe. Bourses bounced at the open, reflecting Wall Street’s late rally off its lows. However, banks have lost their vim and this has helped leave the FTSE 100 in London up just 0.2 per cent, despite another sharp rise in BP stock. The FTSE Eurofirst 300 is down 0.1 per cent as retailers also struggle.

● Forex. The yen remains in demand as the dollar is left vulnerable having shed its protective haven armour. The Japanese unit is up 0.4 per cent versus the dollar at Y87.08, close to a 20-month low, and higher by 0.4 per cent against the euro to Y112.66.

Profit-taking in the euro and sterling after their good runs against the greenback is allowing the US currency to add 0.1 per cent on a trade-weighted basis.

● Debt. US Treasuries continue to benefit from the economic slowdown and deflation concerns, and the 10-year yield is down 1 basis point to 2.98 per cent. The 2-year note yield hit a record low of 0.58 per cent on Thursday as risk aversion hit its height, before rebounding as Wall Street picked up steam just before the close. Today the 2-year is down 1 basis point at 0.6 per cent.

Eurozone sovereign peripherals are mixed following recent good demand for various auctions. Corporate and sovereign credit default swap indices are little changed as the uncertainty witnessed in the equity markets is reflected in the credit spectrum.

● Commodities. Action in the complex is mixed, with the dollar’s recent weakness lending a hand but growth wariness delivering downward pressure on prices. Copper is up 0.2 per cent at $6,659a tonne, while nickel and tin are lower. Oil is lower by 0.3 per cent to $76.42 a barrel.

Gold is down 0.3 per cent at $1,204 an ounce.

Follow Jamie Chisholm’s market comments on Twitter: @JamieAChisholm

Friday’s Market Menu
What’s affecting risk appetite

Risk off

● Earnings: Thursday’s big names tarnish panglossian sheen.

● Dip: US data sends short-term yields to record low.

Risk on

● FinReg: done and dusted. Please.

● GufMex: capped and captured. Please.