Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Greek Euphoria Fades And Alcoa Disappoints

Stock-Markets / Financial Markets 2010 Apr 13, 2010 - 08:30 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleLooking across markets this morning I am struggling to identify consistent themes. Perhaps a little disappointingly, equities have largely failed to kick on despite confirmation of the Greek aid package over the weekend. That said, US markets did close up small enough to see the Dow close just above 11,000 and the VIX has declined to a new low (indeed the lowest level seen since July 2007). Stocks wise AIG (+8.10%) on speculation the Treasury Department may lower its stake in the bailed-out insurer and Peabody (+1.66%) as the company and state-owned Coal India are discussing possible cooperative ventures as part of broad-ranging, preliminary talks.

Alcoa after the close last night posted as-expected ex-item Q1 earnings of 10 cents a share but sales miss, at $4.89 billion vs. expectations for $5.24 billion and a low estimate of $4.74 billion. The aluminium maker said policy trends and consumer sentiment bode well for aluminium demand as do the greenhouse emissions standards which play to the metal’s weight advantages.

But yesterday only marked the beginning of the keenly awaited US earnings season (which really only gets underway in earnest next week, with about 110 S&P 500 companies due to report versus the 19 companies reporting this week). Just as likely, investors are anticipating further support from a benign CPI and dovish Fed Chairman on Wednesday.

Today’s Market Moving Stories

•The main focal point for investors during the European session has been the Greek T-bill auctions. A total of €1.2bn of 26- and 52-week bills was auctioned this morning. The bid/cover ratio was significantly higher than previous auctions though at a substantially higher yields ranging from 4.55% to 4.85%. By way of comparison, Portugal can raise funds in these maturities at 0.62% and 1.04%, so its uber expensive and NOT sustainable from a debt service point of view. The initial response of the Euro was positive with EUR/USD hitting an intraday high of 1.3620. However, those gains have faded with EUR/USD hitting an intraday low of 1.3556. The 10 year Greece-German bond yield spread has remained unchanged.
•UK retail sales posted their strongest year-on-year gain for almost four years in March, but the rise in house prices slowed further as more vendors put their homes up for sale, surveys showed Tuesday. The British Retail Consortium said total sales values, which include new stores, jumped 6.6% on the year in March after increasing 4.5% in February, marking the sharpest rise since April 2006. Same-store sales were 4.4% higher than in March last year, following a 2.2% annual gain in February. The looming election may be a factor in the U.K. housing market. In response today Kingfisher, Europe’s largest home-improvement retailer, climbed 1.9%. Next the UK’s second- biggest clothing retailer, increased 1.6%.
•The Royal Institution of Chartered Surveyors said the rise in house prices had moderated further in March as more vendors put their homes up for sale amid growing uncertainty about the political direction of the country after the vote. The RICS headline price balance, calculated by subtracting the percentage of surveyors reporting falling prices over the previous three months from those reporting rising prices, fell for the fourth consecutive month to +9 in March from +18 in February, the lowest level since July last year. Economists were expecting a rise to +20.
•A price war for deposits between Spanish lenders could be the catalyst for mass failure of the country’s savings bank system, according to bankers and analysts, the FT says. Troubles for the regional savings banks, or cajas, could even trigger sovereign debt problems in the eurozone’s fourth-biggest economy. The price war kicked off last week when BBVA decided to match a 4% deposit rate offer by Santander.
•The launch of the Labour party’s election manifesto yesterday included proposals to potentially veto takeovers by foreign companies in industries of genuine strategic importance such as utilities and infrastructure companies. Their proposals look opportunistic following the recent takeover of Cadbury by Kraft, and represent a significant u-turn given that the current Labour Government played a major part in persuading EDF to takeover British Energy in the last big foreign takeover of a UK utility (they don’t get much more strategic than the UK’s entire nuclear fleet). More significantly the majority of the UK’s utilities are already in foreign hands, so this is very much a case so shutting the stable door after the horse has been coaxed out of the farm, crossed the English Channel and settled down for a life in Provence.

That Pesky Greek Deal, Behind The Scenes
Now we all suspected that there had heightened diplomatic activity in Brussels on last Thursday night, when the Economic and Finance Committee reached the outline of the deal that was subsequently sealed on Sunday. But the NRC Handelsblatt tells the extraordinary story of how it happened: Sarkozy and Berlusconi worked out the deal with Trichet, and then told Merkel that they would go ahead by themselves. Also, Merkel had insisted on a 6% interest rate. Here is the relevant part of the story in full:

“Between phone calls, the French and Italian presidents met face to face. They worked out a deal with ECB chairman Jean-Claude Trichet that would entail Greece paying around 5 percent interest over bilateral loans from all other European countries. This is higher than the rate the ‘super strict’ IMF usually charges, but far less than the interest Greece was paying by the end of last week. Sarkozy and Berlusconi did not want to wait any longer for the Germans who, they feared, wouldn’t start showing some leniency until May, after the German regional elections, which chancellor Angela Merkel intends to win. Merkel also objected to the 16 Eurozone countries taking a decision, and kept insisting all 27 EU member states got involved. The French and Italians reportedly agreed that they could be first to offer Greece loans, granting Merkel some more time. Merkel thus lost the initiative she had held in the Greek bail-out debate for months. It wasn’t until Sarkozy, Berlusconi and Trichet sealed their secret deal on Thursday night that she understood the gig was up, and she dropped her demand for a 6 percent interest rate. To offer Merkel a graceful exit, Juncker talked down the importance of the 5 percent interest rate on Sunday, calling it “anything but a subsidy”. After all, there are a lot of Greek state bonds sitting in German banks. And Germany will have to fork over the biggest loan because of the size of its economy, if the Greeks ask for it.”

The German reaction to the Greek rescue plan is one of a sheer horror. Frankfurter Allgemeine quotes German government officials as saying that the rescue agreement for Greece was not automatic, and might still be vetoed by Germany if Greece were to make a request. The ability by the German government to confuse both the German people and its EU partners is unparalleled, and it looks Merkel got herself into a real political mess over this, by trying to juggle to contradictory message, one for domestic consumption, and one for the EU. Judging from this mess, it looks to us that she was bounced – and unprepared for it. The deal will cost Germany €8.4bn for Germany’s contribution. Der Spiegel noted that the agreement contradicts everything Angela Merkel had promised. Merkel’s self-styled Madame Non is no longer a credible figure. Their hope that this aid might never be needed is completely unrealistic given the circumstances, and given the hectic agreement reached by finance ministers on Monday.

US Bank Reporting This Week
The Q1 2010 reporting season has come around already – US banks kick off tomorrow for the next week, with dates and estimates as follows:

•JP Morgan – Wed 14th April 12pm; EPS 0.638 or net income of USD2.9bn
•Bank of America – Fri 16th April 1pm; EPS 0.100 or net income of USD1.4bn
•Citigroup – Mon 19th April 1pm; EPS -0.002 or net income of USD343m
•Goldman Sachs – Tue 20th April 1pm; EPS 4.148 or net income of USD 2.5bn
•Morgan Stanley – Wed 21st April 1pm; EPS 0.576 or net income of USD 1.1bn
•Wells Fargo – Wed 21st April 1pm; EPS 0.423 or net income of USD2.3bn

The market will be looking for potential earnings drags and skeletons in the closet from the banks in Q1 as we assess how stable and sustainable their revenue sources are in 2010. Investment banking revenues could surprise on the upside in Q1, albeit this is traditionally the strongest quarter of the yr. Mortgage market concerns and impairments from non-performing loans are still going to be evident but I will be looking for confirmation of the view that NPLs have peaked as was suggested during Q4/09 results by most banks. Consumer lending still expected to hit big US banks with JPM, BoA and Wells largest exposed here. Reserve build for US banks will be important.

Company News

•DSG International, the UK’s largest consumer- electronics retailer, is up 4.2% today on speculation the company could be a takeover target for Home Retail Group. Home Retail, whose shares gained almost 5% yesterday after a newspaper report that Wal-Mart’s Asda might make an offer, is more likely to be an acquirer.
•Debenhams slid 1.2% after saying it expects “broadly neutral” trading conditions after first-half profit beat analysts’ estimates.
•ConocoPhillips has agreed to sell its stake in the Syncrude oil sands project in Canada to China Petroleum & Chemical for $4.65 billion, a sign that China’s national oil companies have secured a strong foothold in one of the world’s most important crude sources. The deal marks the biggest energy investment of a Chinese government backed company in North America and it underscores China’s increasingly assertive strategy to secure energy resources around the world.
•Volkswagen raised its China car sales forecast. “The Volkswagen Group’s strong performance in the first quarter of 2010 has exceeded our expectations,” Winfried Vahland, president and chief executive of VW China is quoted as saying. “Sales in the first quarter allow us to be more optimistic.”
•Tullow Oil announced this morning that the Kasamene-3 and Kasamene-3A wells in the Butiaba region of Uganda Block 2 have successfully delineated the extent of oil in the Kasamene field and discovered oil in the Wahrindi North fault block. The Kasamene-3 well was drilled to a total depth of 1,109 metres and results of logging confirmed some 10 metres of oil pay within a 35 metre thick reservoir section of the Kasamene field.

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”.© 2010 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