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
Stock Market Coronavirus Deviation from Overall Outlook for 2020 - Video - 28th Feb 20
Stock Market SPX to Rise back to 3350 - 28th Feb 20
Stock Performance in the Rising Coronavirus Fever - 28th Feb 20
Stock Market SPY Breaks Below Fibonacci Bearish Trigger Level - 28th Feb 20
Will CoronaVirus Pandemic Trigger Stocks Bear Market 2020? - 28th Feb 20
Dow Long-term Trend Analysis - Coronavirus Triggering a Stocks Bear Market? - 27th Feb 20
Trump or Sanders? Both will pile up the Debt - 27th Feb 20
Oil Price Is Now More Volatile Than Bitcoin - 27th Feb 20
A Digital “Fedcoin” May Be Coming… And It Would Be Terrifying - 27th Feb 20
India's Nifty 50 Stocks: Does the Bad Jobs Outlook Spell Trouble for Stocks? - 27th Feb 20
How Crypto Currencies Are Helping Players Go Private - 27th Feb 20 -
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter


Stock Markets Grind Higher on More Upside “Surprises”

Stock-Markets / Financial Markets 2009 Jul 20, 2009 - 05:04 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleIt was a busy week for the bulls, who where urged on by almost obscene results from Goldman Sach’s. There was also what were perceived as respectable numbers from JP Morgan, BoA & Citi. Risk appetite returned last week, lifting stocks by 7% to their highest point in a month.

With the economic news relatively light this week, the big focus will be on earnings with some 28% of the S&P 500 slated to report, including 10 heavyweight Dow components (3M, American Express, AT&T, Boeing, Cat, Coke, Dupont, Merck, Microsoft, and Pfizer). Financials reporting this week include Morgan Stanley and Wells Fargo report. Other bellwether of the US economy and household names to watch out include Apple and Coca-Cola (Tues), Pfizer (Weds), and McDonalds.

With earnings expectation massaged to an easy-to-beat level, expect more of the “better than expected” results headlines. So, with the economy so weak, how are these companies “beating” analysts estimates? Well, two ways. Firstly, stock analysts are in the main about as smart as rating agencies, only duller and as far behind the curve, and secondly, by slashing costs. The hard bit comes next as one can only shave, squeeze and sweat the assets so far. This is not organic earnings growth

Today’s Market Moving Stories

  • The US National Association of Business Economists (NABE) reported its members expected the economy to stabilise over the second half of the year. However, it warned that members didn’t think that would extend to
    full blown recovery, and in fact job cuts were likely to continue for the remainder of the year. Industry demand was still negative, but the NABE said its index was up 9 points from the lows to -5.

    US regulators closed two banks taking the number of fails to 57 for the year.

  • The UK’s Rightmove reported house prices rose 0.6% mom in the month through mid-July, which put the yoy loss at 3.1%. That was the lowest annual decline in a year, and compared with -5.5% yoy in June. Rightmove noted that chain lengths are increasing, which indicated that the property market mechanics were beginning to work again. It said that showed up in mortgage approval and transaction numbers. Still, it said that lenders are nowhere near back to the kind of credit availability they once offered, while the market is in reality recovering from a total freeze. In that context then, the upturn is only slight.
  • Fed Chairman Ben Bernanke will take centre stage this week when he presents his semi-annual update on monetary policy and the economy to Congress. The markets will be looking for signs that the Fed might expand its quantitative easing programmes. However, the minutes from the last FOMC meeting suggest that the Fed is reluctant to do so.
  • Despite their spreadsheet woes, there was some good news for C&C in the latest Nielsen GB on-trade data for April and May, which showed improving trends for Magners. Magners volumes’ share of the on-trade cider market rose to 15.1% in May compared to 13.9% in April and March. Magners on-trade market share had been in steady decline since early 2007. Magners Pear reached 12% weighted distribution in May. This is a good number given that the brand was only launched in late March.

The View From The USA
US commercial lender CIT managed to get itself a rescue package over the weekend, providing it with the ability to roll its upcoming debt requirements. Its bond holders will provide $3 bln over 2-1/2 years, with the financing backed by CIT’s remaining unsecured assets (reported at $10 bln). CIT has around $40 bln of long term debt, with $1.1 bln due in August and then another $2.5 bln by the end of the year. By the spring of 2010 it will have total financing requirements of $10 bln. CIT is not a mega-bank, so its potential failure wasn’t a financial system risk in the same way Lehman was or Citi could have been. However, with a million loans out there with a huge chunk of that to the transport and retail sectors, CIT represented a massive economic risks. Many of its customers are in sectors that are at the forefront of recession and hence would struggle to receive financing from elsewhere. Pulling the plug on their loans would have had much greater consequences. It’s worth noting however that the approach of bankruptcy of CIT placed the firm and the economy at greater threat – many of CIT’s borrowers drew down whatever credit they still had available to them for fear of losing a lifeline. That puts CIT far more vulnerable to any further economic setbacks.

German Bank Crash Ahead?

While CIT may have achieved a reprieve, all remains uncertain at Germany’s Hypo Real Estate, which admits that even EUR10 bln might be insufficient to keep it afloat. In an interview with Germany’s Welt am Sonntag, Michael Endres, the head of HRE’s board said the bank ‘clearly has a solvency problem’. He said the bank had, in the past, expanded too quickly in foreign markets and especially into the US mortgage market. The newspaper noted that a leaked memo from Bafin suggested HRE was carrying problem assets of $268 bln.

This is a cracking story if true. German paper Sueedeutsche Zeitung reports this morning that the German government realises that its current bank rescue strategy is not working, and is considering to nationalise parts of the country’s banking sector by force. The change of mind appears to reflect acute fears by finance minister Peer Steinbruck in particular of a credit crunch to coincide with the general election. Germany’s bad bank scheme, which is essentially cost-free, stands no chance of increasing credit flows, the report says, so Germany is increasingly looking at the US and the UK of ways to make banks increase credit. The banks would receive new capital, whether they want it or not, in return for a government stake in those banks, which would allow the governments to influence banking policy.

Although earnings from IBM, Intel & Goldman’s caught the bulls’ eyes last week, the rest of the earnings were far less impressive, though. Friday’s news in particular looked unimpressive, though they had little impact on global equity indices. GE revenue fell 17%. Profit from continuing operations declined 47%. Equipment orders dropped more than 40%. Citigroup switched to a profit on the Smith Barney gain but reported a large negative impact from rising consumer loan losses and write-downs of the valuation of its debt. Bank of America profits were down 5.5% on continued credit woes too. BB&T profits plunged 52%. I note an interesting and sobering article in Barron’s Online this morning: “You Call This a Recovery? Not So Fast.” The article expands on the notion of results being achieved through lower costs and reports that, “there is simply no evidence yet that enterprise tech spending is picking up.”

European Movements
European stocks are looking perky this morning buoyed by Asian market (the Hang Seng was up 2.4% overnight). Early movers include mining stocks Rio Tinto, BHP Billiton & Xstrata as copper rallied to a nine month high and banking stocks such as Lloyds (which according to weekend press report might actually post a “profit” for 2009). Der Spiegel is reporting that VW is planning to buy all of Porsches sports car division. Oil companies could also get a lift from crude back above $64 barrel and news that Chinese refiners have boosted processing to a 16 month high. According to UBS and Guggenheim Partners, valuations in the oil sector are at 14 years lows.

Irish Interests Flying Low
On Friday (July 17th), Liam Carroll (Zoe developments etc)– one of the Ireland largest property developers – approached the High Court for court protection for six companies with combined debts of €1.2bn. The court heard that, if liquidated, the companies would have a deficit of €900m, which would imply a 75% write-down on the loans. The move by the developer to seek protection is a result of pressure from ACC bank, which is owed €131m. ACC, which is owned by its Dutch parent (Rabobank) has been taking a more aggressive tone with developers, while domestic Irish banks are believed to be awaiting the outcome of NAMA. However, the movement now for court protection threatens this NAMA process. Bank of Ireland is owed €489m, and it is owed €113m by the developer. In related news according to the Sunday Tribune, NAMA wants to apply haircuts (discounts) of 25-33% on the most impaired loans it will inherit from the banks.

The market seems to have taken the appointment of new Aer Lingus CEP Christoph Mueller well. He has an impressive CV with the kind of restructuring / M&A experience from his time at TUO Travel where he made his name

Economic recovery in UK ‘on hold’
The UK economy is set to shrink by 4.5% in this year, the biggest fall in a single year since 1945, according to an influential think-tank. The downbeat forecast is more pessimistic than the consensus view, and considerably worse than the 3.5% fall predicted by the government. The Ernst & Young Item Club also warned that hopes of economic recovery are “running ahead of reality”. It does, however, predict a return to modest growth of 0.5% in 2010.

‘Chance of relapse’
“Unfortunately, it is hard to see any very solid grounds for sustained optimism at the moment,” said Professor Peter Spencer, chief economic adviser to Item. It remains unclear how quick and complete recovery will be, and there is still a serious chance of relapse Professor Peter Spencer, Ernst & Young Item Club. “The economic patient has been in trauma, but thanks to the paramedics at the Treasury and the Bank of England who pumped billions of pounds worth of medicine into the economy, the patient has stabilised for now,”
he added. But any recovery could be short lived, he warned. “It remains unclear how quick and complete recovery will be, and there is still a serious chance of relapse.” Indeed some analysts believe that, despite hopes the worst of the downturn may be behind us, there could be a so-called “double dip” recession, where the economy stabilises before contracting again. The only “ray of hope”, said the Item Club, is a recovery in world trade, which UK exporters would be able to exploit due to the weak

Lack of lending
The main reason for the gloomy outlook, the club said, was the fact that banks are still not lending enough to boost the economy. “There is currently little sign of any extra lending to either companies or consumers. Banks are saying that they will expand lending more aggressively over the next three months, but it seems unlikely that they will be able to meet the demand for credit,” argued Professor Spencer.

The Item Club also warned of the threat posed to the economy from swine flu. If doomsday predictions do materialise, it forecast a further 3% contraction in GDP this year, on top of the 4.5%. The flu could also wipe out any growth next year, with a worst case scenario of a further 1.2% contraction. The Item Club also predicts that UK interest rates will be kept at their current level of 0.5% well into next year. Last week, the International Monetary Fund published its latest report on the UK economy, in which it forecast economic activity to shrink by 3.75% this year.

The always readable John Mauldin on Europe’s plight.

The joys of Sach’s. An internal memo from Goldman’s.

Maybe car dealers in the Crumlin area of Dublin are should try this innovative sales pitch.

And finally….

Another bailout ditty…..

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