Stock Market Still Seeking Direction

It was a tale of two markets yesterday (Monday). The NASDAQ (^IXIC) benefited from hopes of government spending on tech and telecoms infrastructure but the wider market fretted over the fate of the ‘bad bank‘ plan.

Today’s Market Moving Stories

• Significant policy moves from Australasia overnight. The RBA (Aussie Central Bank) cut rates by 1% to 3.25%, the lowest level in 45 years and also announced a AUD 24bn stimulus package to ward off a recession. Over in Japan the Bank of Japan said that it will begin a Yen 1trn ($111bn) programme of direct equity/stock purchases from the banks until April 2010 and hold these until at least march 2012. It’s really a token drop in the ocean.
• More grim news headlines emanating from China today. It’s been a bit a recurring theme of mine here that the ugly spectre of civil unrest and possible regime change may prompt the authorities to embark on a devaluation of the Yuan leading to a trade war with the US. This could plunge the world into a depression. Stories like 20 million jobless Chinese migrants only heighten such worries.
• US Treasury Secretary Geithner is set to outline (yet another) new financial rescue plan in a speech next week. I wonder if he’s regretting taking the job already as he didn’t even get a honeymoon hiatus.
• Staying in the US the Fed Senior Lending Officer survey showed that 65% of banks had tightened lending standards to large and mid-sized firms since their October report.
• Fed member Fisher (a former hawk) said that “its time for fiscal policy to kick in and help restore confidence.”
• The Association of British Bankers has called upon the BoE not to cut interest rates any further as this would hurt savers. Wish I’d some savings to get “hurt”. Surely the idea is to force people to spend!
• German retail sales released this morning came in much weaker than expected falling -0.2% for -0.3 YOY. Last months number was also revised considerably lower. While this should be further food for thought for the mandarins of the ECB in Frankfurt they will no doubt ignore the fresh warning signs of economic collapse and opt for the pointless pause in the rate cutting, talking voodoo-liquidity trap nonsense when we face a possible deflationary spiral.
• Goldman Sach’s have gone all negative on the Dow Jones.

Equities

• BP had a BIG miss, posting a $3.3bn quarterly loss and now plans to cull 5k jobs.
• Scandinavian airline SAS were also in the red, swinging to a fiscal year loss of SEK 6.3bn. More worryingly for their stock price, they are said to be planning a rights issue! They also plan to wield the axe and slash a total of 8.6k jobs and refocus back on the home market.
• Better tidings from defensive play Imperial Tobacco who said trading to end Sept ‘08 was in line with expectations. They are likely to gain from Sterling’s weakness in term of repatriated profits from sales abroad.
• Vodafone also made a point of mentioning the silver lining of the weak pound when announcing their results today and upped guidance for 2009. Telecom stocks are up today on European exchanges.
• DCC’s interim management statement guides 13-15% earnings growth on constant currency basis. Previous guidance had been 10% growth. This stronger performance has been driven by the energy division, which has benefited from integration synergies arising from acquisitions in recent years and much colder weather in the UK and Ireland. On the downside is the weakness of Sterling earnings going forward when translated into Euro.
• CRH may be softer in tone after Dyckerhoff, the German-based cement and ready-mixed-concrete producer, gave a sombre outlook for both European and US markets for 2009.
• A report in the journal of Neurology said that blood washing reduces Elan’s controversial drug Tysabri to acceptable levels within two weeks. The view is that these results may make doctors more comfortable with prescribing the drug.

Data And Earnings Today
Economic releases are purely of a second division nature with US Pending Home Sales (consensus is flat) and US Total Vehicles Sales (10.2m expected).

To make up, we’ve an interesting day of earnings reports ahead. The mixed bag of companies includes Merck (expected EPS $0.74) , Schering-Plough ($0.30), Dow Chemical ($0.07), Motorola ($0.00), Northrop Grumman ($1.55), PNC Bank ($0.75), Disney ($0.52), UPS ($0.85), Electronic Arts ($0.90), Met Life ($0.14), Tyco ($0.47) and Yum Brands ($0.45).

And Finally… More Public Opposition To Banking Bailouts

Disclosures: None

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Comment by British Bankers' Association

2009-02-03 09:50:19

Not us, guv! The British Bankers’ Association certainly did not ask the Bank of England to put further rate cuts on hold. I think you will find that’s the Building Societies Association. Completely different outfit. Please amend.

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