While you were sleeping: Bellwether US earnings season under way

Tuesday 14th April 2009

The US first quarter earnings season gets under way in earnest this week, with market observers trawling corporate results for signs that the world's bellwether economy may be starting to bottom out.

European and some Asian markets were closed for Easter yesterday, but US trading resumed, with the S&P 500 Index see-sawing to add 0.6 percent to 862.05 in late trading in New York.

The Dow Jones Industrial Average rose by 0.2 percent to 8096.52, held back by falls in Boeing and Chevron, but continuing its strongest five week run since the Great Depression. Meanwhile, the NASDAQ was steady, climbing just 0.1% in Monday trading.

Attracting particular attention between now and the end of the month are banks' earnings, with the results of US Treasury "stress testing" on bank balance sheets due in late April. . Treasury Secretary Timothy Geithner has predicted "large" amounts of capital" will be required by some banks.

That could "take the bloom off any rosy first-quarter report", Geithner said.

Bloomberg reported that Wells Fargo may have as much as US$120 billion of stressed assets on its balance sheet, and may require as much as a further US$50 billion in federal support.

Posting its results a day earlier than expected, Goldman Sachs Group Inc strongly outperformed against expectations, announcing a US$1.66 billion first quarter profit and plans to raise US$5 billion in common shares. Earnings per share at $US3.49 were almost double the average predictions monitored by Reuters.

Citigroup Inc.and JPMorgan Chase & Co. are also due to report this week.

The most sobering news of the day came from plane-maker Boeing and car-maker General Motors. Boeing warned that production cuts and lower prices for planes would hurt first quarter earnings.

Traders sold GM heavily, with its shares falling 16%, amid growing speculation that the iconic manufacturer will be forced into bankruptcy, wiping out existing equity.

Also in the US, President Barack Obama announced that federally funded infrastructure projects intended to stimulate the economy were ahead of schedule and under budget. Obama also lifted currency and travel restrictions on Cuba, one of the last relics of the US Cold War with Soviet Russia.

On Asian markets that opened during the Easter weekend, stocks rose led by Taiwan, whose shares hit a seven-month high as new Chinese data showed a strong jump in new lending - a further sign that the world economy may be recovering in the first part of 2010.

The Chinese data helped spur interest in Asian and Australasian currencies, as investors moved out of the safe haven US dollar and Japanese yen on signs of an improving economic outlook.

Japan's Nikkei Index recorded a 0.4% fall for the day.

Meanwhile, the International Energy Agency cut global oil demand forecasts for 2009 by a further 4%, prompting a fall in benchmark crude prices. Brent crude fell US$1.92 to US$52.14 amid speculation of a further cut in OPEC production.

June gold futures briefly touched US$900 before closing in thin trade at US$895.80, up 1.4%.

Comments from our readers

No comments yet