After Friday’s timely reminder to investors that the poor profit and poor outlook from the mighty General Electric means there’s a lot of bad things to still be endured in the current market uncertainty, it will be a gun-shy mob that looks ahead this week to the first quarter reporting season and some important stats.
The US, data for retail sales, inflation (the Producer Price Index and the Consumer Price Index) , a survey of home builders, housing starts, industrial production, the Fed’s Beige Book of anecdotal evidence and a couple of business surveys are due for release.
US retail sales in March will be weak after the flood of indifferent sales reports from leading chains (except Wal Mart, but even then the market glossed over some problems). We found out that consumer confidence in the US is now at a 26 year low, employment is fading, unemployment is rising, and home prices are still heading south and are likely to provide further confirmation that the US is in recession.
In fact Linens’n Things, a leading homewares chain owned by private equity group, Apollo, is teetering on the brink of being put into bankruptcy because of falling sales, profits and an onerous debt burden.
But it’s the first quarter reporting season: Alcoa and GE last week received contrasting reactions. Alcoa’s poor figures were ignored by the market at first, then UPS, the transport giant, cut its outlook (and Fed Ex’s CEO also chimed in saying growth had vanished in the US) and on Friday GE’s bad earnings report and forecast cut was enough to tip sentiment into the negative.
Few, if any, brokers and commentators were looking through the GE first quarter and reporting better things, and by Friday, Alcoa’s shares had shed around $US3 in a belted reaction to a poor report.
So US investors will be skittish as they confront reports from troubled financial groups, Citigroup and Merrill Lynch: Citi on Friday fell below Apple Corp in the market cap rankings as investors shook off the rose-coloured glasses that had lifted US banking stocks by as much as 20% in a month since the Bear Stearns rescue.
Both Citi and Merrill’s are expected to report more losses: Citi will report the sale of $US12 billion in leveraged loans to some buyout groups (who are buying back some of their loans!).
The deal will be studied closely to get exact valuations (to make sure there’s no padding of the headline figure to boost values) which will be used by banks across the world to revalue their holdings of around $US200 billion in unsold securities.
JP Morgan reports as well and comments about its rescue purchase of Bear Stearns, backed by the US Federal Reserve, will be watched closely.
Tech giants, Intel, IBM, Google and eBay are all due to report. Nasdaq, the main exchange for tech stocks in the US, had been doing a little better than the other exchanges and indices. These results will test that buoyancy. Google in particular, will be closely watched because its shares have shed 40% in value since last November.
Including financial groups, market consensus in the US is for a 12.2% fall in Standard & Poor’s 500 stocks, after a 25% fall in the December quarter. The GE and Alcoa results will cause that estimate to be reassessed; especially GE which now sees little or no growth in 2008 (and remember it’s a big exporter as well) compared to previous estimates of at least 10% earnings growth.
Five small US airlines, private and listed, have failed or gone into bankruptcy in the past month as high fuel prices and falling passenger numbers bite. The US airline industry might see some mergers soon, but all the major operators and incurring losses (some huge, such as at Southwest and American) as the Federal Aviation Agency orders inspections of thousands of planes because some of the airlines fudged or lied about maintenance schedules and work.
In Australia, the minutes from the RBA’s last meeting are likely to confirm that interest rates are on hold for now. The commentary at the end of the April 1 announcement and the Governor Stevens comments to the House of representatives Standing Committee on Economics were framed at this meeting. Mr Stevens makes a public speech in Canberra several hours after the minutes are released on Tuesday.
Australian data for housing finance for February will also be released.
In Asia the Chinese economic data for March will be released later in the week and will be watched closely for signs of a cooling in growth and inflationary pressures.
MONDAY:
ABS housing finance figures for February; Clean Coal Conference in Sydney
TUESDAY:
Minutes of the April 1 Reserve Bank board meeting released; RBA Governor, Glenn Stevens speaks in Canberra in the afternoon; ABS issues lending finance figures for February.
WEDNESDAY:
AXA Asia Pacific AGM in Melbourne; Australian Institute of Company Directors lunch in Sydney with Business Council CEO, Greig Gailey
THURSDAY:
RBA Bulletin; ABS import figures for March; Woodside Petroleum March quarterly report; Rio Tinto AGM in London; AGM for Australand and Oxiana; EGM for Walter Diversified Services.
FRIDAY:
ABS issues international trade price indexes for March quarter; Zinifex CEO, Andrew Michelmore addresses the Melbourne Mining Club (The Oxiana merger will be top topic I, think); Coal And Allied AGM; Capral Aluminium AGM.
