2010-07-20 11:26

XTB market snapshot

Monday brought a correction of the Friday sell-off on Wall Street, S&P 500 gaining 0,6% and Nasdaq Composite 0,9%. Still, there are many threats on the horizon, making the return of the bulls doubtful. The most important factors are recent quarterly reports of the Amercian companies and a series of weaker macroeconomic figures from the United States.

Losses in after-hours trading

While the recent session was rather bullish, bears dominated the after-hours trading. The AHI Index lost 0,6%, as the investors felt disappointed with the results of IBM and Texas Instruments. In the second quarter the earnings of IBM reached $3,4 bln ($2,61 a share) against $3,1 bln ($2,32 a share) last year, while the analysts expected $2,58 per share. The revenue rose by 2% to $23,7 bln and was $470 mln below estimates. The management said that the reason for weaker-than-expected revenues was strong dollar. The investors weren’t satisfied with this explanation and IBM shares fell by 4,3% in after-hours trading. A similar situation happened with Texas Instruments, which had $3,5 bln revenue against 3,52 bln expected. The company earned $769 mln, which met the expectations.

Snapshot from Asia

The Asian markets didn’t notice the IBM sell-off in the after-hours trading. The Shanghai Stock Exchange was the leader of the bulls. The expectations concerning possible end of tightening of the monetary policy in China, because of weaker-than-expected 2Q GDP growth in China, combined with fiscal crisis in Europe and worse figures from the States, were an impulse for gains. The gains didn’t reach Tokio, where shares lost on their value, because of the strong yen slowing the exports.

Asia over IBM

The bullish sentiment in Asia will probably have a stronger impact on markets in Europe than the IBM results. The quarterly results, released before the market open on Wall Street, may be crucial, particularly from the Bank of New York ($0,57 a share expected), Goldman Sachs ($2,33 a share forecasted), Johnson&Johnson ($1,22 prognosis) and PepsiCo ($1,09 expected). The figures from the US housing market may also influence the mood today.

Not only the sentiment

The sentiment on equity market may be crucial for the EUR/USD. Good news may support the euro, whereas weak may be in favor of the dollar, but it won’t be the only factor influencing the currency pair. After the Moody’s downgraded Ireland rating, the investors should focus on the Irish debt auctions.  The offer size would be 1,0-1,5 bln EUR and there shouldn’t be any problem with placing it. Comparing this situation to the auction of Portuguese bonds last week, the today’s auction may positively influence the sentiment.

Jacek Mielcarek
jacek.mielcarek@xtb.pl
XTB Poland

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