Scoreboard: Earnings learnings

Positive results from big US firms helped boost global equities while the market is shrugging off Chinese banking fears.

Global equities bounced back after modest falls in the prior session, boosted by some positive earnings reports from companies like Ford, Amazon and Visa. At the time of writing, the S&P500 was up 0.4 per cent to 1752, the Dow was 108 points higher (15,521) and the Nasdaq was 0.6 per cent higher (3931). In truth, earnings weren’t all great – AT&T and Xerox to name just two, yet the bigger picture is that the earnings season isn’t turning out too bad and I guess there isn’t really anything in the background, macro-wise, to spook punters at this stage.

Even China’s banking ‘problems’ are passing without incident it seems, and while this latest spike in interbank lending rates has been noted with interest, it is largely being ignored. That just leaves the pick-up in some of the activity indicators like the Chinese manufacturing PMI yesterday (HSBC’s estimate of it anyway), while over in Europe, the PMIs remain above 50 (indicating acceleration) although they did slip in the latest month (the composite index at 51.5 in October from 52.2).  

Interestingly, even with the pick-up in China’s economic activity of late, the Australian dollar was weaker overnight. It’s bucking a global trend that saw euro, sterling and yen all stronger, even if just modestly. As I write, the Aussie dollar is about 30 pips lower to 0.9616, although at the low it was below the 0.96 mark at 0.9572. Euro for its part sits just above 1.38 with a high of 1.3820 and a low of 1.3766. Sterling was then up 10 pips to 1.6203, although at the low it was trading at 1.6140.

Other than that there was a bit of US data, of which the jobless claims figures were the most interesting. While they fell in the week to October 18 – 350 thousand from 362 thousand, claims are still quite a bit higher than the lows we were seeing around the 325 thousand mark.

It’s fair to say that the numbers are being inflated by the shutdown and that the ‘true’ underlying figure is below 350 thousand. Yet there is no agreement on magnitude – and there is also a view floating around that the low rates prior to the shutdown were also anomalous. Trade figures showed a 0.1 per cent fall in US exports, while imports were flat. The trade deficit itself was at $38.8 billion in August from $38.6 billion – exciting.

Price action otherwise wasn’t all that interesting – the US 10 year treasury yield up a bps or two to 2.516 per cent – and it’s the same with commodities. Although moves in this space are increasingly hard to predict or even explain with any consistent framework. Precious metals pushed higher – gold up almost $12 to $1345, while silver was up 0.5 per cent. Elsewhere, crude was up smalls (0.2 per cent to $97.05), and copper was flat effectively (up smalls).

The calendar today is light regarding domestic data, and there isn’t too much for the region as a whole – indications are that out market will have a quiet one and the SPI is up only 6pts. Japanese CPI is about it. Tonight the key data includes the German IFO survey, UK GDP and for the US durable goods orders.

Hope you have a great weekend…

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