Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter


Stock Markets Hit by Swine flu and Stress Tests Versus Green Shoots of Recovery

Stock-Markets / Financial Markets 2009 Apr 29, 2009 - 06:37 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleThe bulls and bears called it a draw yesterday. Despite a continued escalation in the number of reported swine flu cases, horrible numbers for US Steel and fretting over financials needing more capital, equities held up well. News that IBM is boosting its dividend and doing a buyback, improving consumer confidence numbers and data from the Case Shiller survey which pointed to the rate of decline in house prices easing off all provided a fillip.

Today’s Market Moving Stories

  • At least six of the 19 largest US banks require additional capital according to preliminary results of the stress tests. Most of the capital should come from converting preferred shares to common equity. The FT reports that Citigroup has told regulators that any capital shortfall can be filled by selling assets and converting preferred shares as opposed to needing further government help.
  • The US ABC consumer comfort index improved to -45 in the latest week from -47, confirming the message from other measures that consumer sentiment is gradually picking up.
  • Green Shoots Are For PandasThe Chinese Minister of Commerce Chen Deming said that aggressive monetary and fiscal policies put in place over the past few months are being effective in supporting China’s economy but the current improvement is not solid. He adds that China cannot turn around its country in isolation and needs improvement elsewhere in the world. On currencies, he said that using the US Dollar as a main currency for international trade has many deficiencies.
  • The German ‘Bad Bank’ plan announcement is imminent according to unconfirmed reports. Officials have decided on two separate models, one for commercial banks and one for Landesbanks. Details of the commercial bank plan are expected next week with a view to implement in the summer. The Landesbank plan reportedly needs more work. The German FinMin estimates toxic assets worth €300bn and the important question now is who will pay for it - the central government or some kind of special purpose vehicle? The former will obviously have an immediate impact on German debt funding programme, but either way, Germany’s debt quality will be questioned for a change.
  • German industrial heavyweight Siemens shares are on the up after posting better than expected quarterly numbers on a jump in sales of wind turbines, transformers and medical scanners.
  • French drug maker Sanofi are also on the rise after its Q1 profit climbed 16% on strong demand for its diabetics medicine Lantus.
  • Grafton Group today released an Interim Management Statement (IMS) showing a fall in Q1 turnover by 22% on a constant currency basis to €470m due to what was described as “the most challenging trading conditions in decades”. Poor weather, the decline in the value of Sterling and reduced spending on housing and residential repair were all strong headwinds for the group’s retailing and merchanting divisions in the period.
  • So what’s the worst case scenario with swine flu? Well, the virus could be expected to claim the lives of about 2% of the 90 million Americans affected, which would be just under 2 million. And that’s just for the US.
  • Old habits die hard as Citigroup seeks approval to pay out bonuses.

Stressed By The Flu? Don’t Forget The Stress Tests!

This little piggy may have gone to the market and news about the increase in the death toll due to the swine flu are overshadowing leaks, rumours and comments about the US banks’ capital adequacy tests. However, the results of the tests will have a more significant market impact in the next few sessions.

The news about the possible pandemic outbreak are making the first pages of all the major newspapers and catching most of the headlines in the newswires. This is perfectly understandable, as the threat of the beginning of a pandemic similar in scale to the 1918-19 Spanish flu is by far the greatest risk that humanity could possibly run. However, preliminary analyses and data does not seem to justify the amplitude of the media coverage, especially if we consider that this process is expected to last for many months ahead. The swine flu virus is likely to become a real threat only once it has completely adapted itself to the human body, so to become fully transmissible human-to-human. And this probably will happen in the next wave of the pandemic, if it eventually becomes so.

For the time being, however, the event that is most likely to impact the markets is going to be the release of the outcome of the US banks stress tests conducted. Admittedly, the stress tests poses a ‘lose-lose’ situation. If no bank turns out to be undercapitalised, the market will question the severity of the test and ultimately will lose further confidence in the ability of the American institutions to deal with the situation, which may result in an equity sell-off. If a sufficiently large number of banks turns out to be undercapitalised, this could trigger a renewed wave of risk aversion and prompt a stock market sell-off, providing the catalyst for the new leg down we are looking for. However, even if the market reaction seems to be biased on the downside (in terms of equity prices), this should still be regarded as the most important piece of information the market should focus on in the next couple of weeks.

Data Ahead Today

Euro area economic sentiment for April is released at 09:00. It should be a little less gloomy, improving to 66.1.

Later at 13:30, there’s a first stab at US GDP for Q1, which is expected to fall by 2.8% saar, less than half the drop seen in Q4. There should be a more favourable composition of growth (consumption should stabilise and inventories should account for most of the contraction). Domestic final sales to domestic purchasers should fall by 3.5% saar, compared with a 5.8% drop in Q4. At 19:15, we have a US interest rate decision. The post-meeting communiqué shouldn’t be market-moving, with the main focus on the language describing the economy.

Earnings highlights today include Visa (expected EPS $0.64), Aetna ($0.93), Time Warner ($0.38), Starbucks ($0.16), Wyeth ($0.88) and Goodyear ($-1.38).

And Finally… Extreme Home Makeover

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules