World Week Ahead Earnings, data to dominate

Monday 14th April 2014

Wall Street is beginning a four-day week on shaky ground following last week's selloff.

Overall the start of the quarterly earnings season was positive but with investors nervous about the outlook, it only took JPMorgan's disappointing quarter, released on Friday, to dent sentiment. In the coming days more banks are scheduled to release their latest earnings including Citigroup, Credit Suisse, Goldman Sachs, and Morgan Stanley.

Also on deck, among others, are Coca-Cola, General Electric and Google.

Last week, the Dow Jones Industrial Average sank 2.35 percent, the Standard & Poor's 500 index dropped 2.65 percent, while the Nasdaq Composite index shed 3.10 percent. The Nasdaq biotechnology index dropped for the seventh week in a row.

After last week's slide, the Dow is 2.7 percent down so far in 2014, 1.2 percent has been wiped off the S&P 500 and the Nasdaq has lost 3.9 percent. While still low in historical terms, the VIX, or Wall Street's fear gauge, surged 7.2 percent on Friday to 17.03 as investors shed holdings in shares of some of last year's highest flyers.

In contrast, the past five days proved a good week for US Treasuries. Yields on the benchmark 10-year bond fell 10 basis points to 2.63 percent in New York, while the 30-year bond yield declined 10 basis points to 3.48 percent, according to Bloomberg News.

It is a holiday-shortened week on both sides of the Atlantic with markets in the US and several in Europe set to close on April 18 for Good Friday.

Before the week passes though, there will be more than enough fresh comment on the outlook and data to analyse.

Investors will eye Federal Reserve Chair Janet Yellen who is scheduled to speak on monetary policy and the economic recovery on April 16 in New York. It's her first public appearance since the release last week of minutes from the latest Federal Open Market Committee which eased concerns about a pending increase in US interest rates.

The next Fed Beige Book, a respected source of anecdotal information on the current state of the economy across the US, is due on Wednesday.

The coming days will provide an update on the US real estate industry too with the housing market index, due Tuesday, and housing starts, due Wednesday.

Other clues on the state of the US economy will come in the form of reports on retail sales and business inventories, due today; the consumer price index and the Empire State manufacturing survey, due Tuesday; industrial production and Atlanta Fed business inflation expectations, due Wednesday; weekly jobless claims and the Philadelphia Fed survey, due Thursday; and leading indicators, due Friday.

In Europe, the Stoxx 600 dropped 3.1 percent last week. The UK's FTSE 100 slumped 2 percent, France's CAC 40 slid 2.7 percent, while Germany's DAX tanked 3.9 percent.

European Central Bank President Mario Draghi on Saturday said that a further appreciation of the euro might prompt easing of monetary policy to prevent already-benign inflation in the euro-zone from decreasing further. Last week the euro gained 1.3 percent to close just under US$1.39.

"A strengthening of the exchange rate requires further monetary stimulus," Draghi said at a news conference. "That is an important dimension for our price stability."

The latest data on the euro-zone economy to be released in the coming days include reports on industrial production, the ZEW survey, consumer price index and the current account.

On Wednesday, the latest data is expected to show China's first-quarter economic growth slowed to about 7.3 percent from 7.7 percent in the previous quarter, according to a Bloomberg survey.

BusinessDesk.co.nz

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