All eyes on US reports this week

The global earnings season moves up a gear this week, when 134 Standard & Poor's 500 companies are due to report in the United States.

Craigs Investment Partners broker Chris Timms said yesterday it was hoped a shift in focus back to genuine corporate fundamentals might see sentiment improve.

That would depend on some "reasonable results'' from key sectors.

This week, several major companies are reporting, including 3M, Apple, AT&T, United Technologies, Facebook, Caterpillar, Amazon, Microsoft and Visa. So far, 73 companies have reported; 78% beat earnings estimates and 48% exceeded revenue numbers.

"Despite the rebound last week, it would probably be somewhat bold to declare the volatility over,'' Mr Timms said.

"However, there could be a couple of positive catalysts this time. Apart from the US reporting season getting going in a big way, we also have central bank meetings from the US Federal Reserve and the Bank of Japan, both of which have the potential to calm sentiment with some reassuring comments.''

If oil prices remained above $US30 ($NZ46), any of those catalysts could see the relief rally continue, for now, Mr Timms said.

The Fed holds its first meeting of the year tomorrow and Thursday (New Zealand time), culminating in a statement due for release at 8am on Thursday, an hour ahead of the Reserve Bank of New Zealand.

No press conference was scheduled for the meeting, nor were any update economic forecasts due.

These would come at the second Fed meeting, which was not until seven weeks later in mid-March, he said.

There was virtually no chance of any policy changes this week, although the wording of the statement would be closely watched.

The Fed increased interest rates in December for the first time in nearly a decade and it signalled its intention to follow that up with four further rate hikes this year.

Markets were cynical about whether the Fed would be able to increase rates that much and were pricing two to three hikes this year rather than four, Mr Timms said.

The extreme volatility during recent weeks had caused those expectations to fall even further and the market pricing now suggested just one hike in 2016.

Futures pricing implied just a 22% chance of a hike at the March meeting which was previously thought to be "live''.

Those odds sat at 51% at the start of the year.

"A dovish Fed could provide a catalyst for a more stable market this week.''

Kenny & Co equity market strategist said bellwether Apple would be the most closely watched when it reported this week.

Signs of a fall in iPhone sales after soft sales forecasts from some of its suppliers could seal a third starlight month of declines for the stock, which had an outsized effect on the broader market.

"We are going to be provided the clearest picture of not just backward looking fourth-quarter earnings but much, much, much more importantly, guidance.

"Guidance is going to be significantly more important in terms of that overall conversation of whether the US economy is weathering the global storm.''

 


 

At a glance

• Global earnings season increases pace

• No change in monetary policy expected from Fed

• Markets cynical about Fed's ability to increase rates

• Apple the company to watch this week 


 

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