Stocks Fail To Gain Traction

An acronym a day won’t keep the bears away! A rollercoaster session for equities saw them end flat. Markets couldn’t decide whether to go with more dismal housing data or Obama’s fresh “Homeowner Affordability and Stability Plan” initiative. Ultimately buyers remained at home licking their wounds as the investors drew scant comfort from the latest proposals as stocks continue to hover close to the November lows.

Today’s Market Moving Stories

• More bad news from Ben Bernanke! Fed minutes released yesterday were one of the most downbeat I can recall. They lowered their growth forecast to just 0.5% (optimistic), see no indication of the housing market even beginning to stabilise (despite countless government initiatives and rate cuts) and see renewed deterioration in the banking sector posing significant downside risks (what price BoA and Citibank to be nationalised very soon?) The patient isn’t responding to treatment.
• Meanwhile this side of the pond, the BoE MPC minutes showed an 8-1 vote in favour of a 50bp cut and even discussed the possibility of a 100bp cut. The committee also voted 9-0 vote to seek authority to proceed with quantitative easing - a little sooner than some had expected. The BoE regional Agents’ report reinforced the commonly held view that investment is collapsing, that the unemployment rate is likely to reach double digits and pay growth is slowing. The report highlighted the evolution in hiring and firing trends and warned of significant cuts in permanent headcount.
• Banking bear Meredith Whitney is apparently leaving Oppenheimer to start her own firm. Mind you, we will now have an endless list of people say that this represents a bottom in banking. Sigh.
• In Asian news Japanese Airlines is seeking a $2.15bn “loan” from the government to help it weather the global recession / depression (you choose). I wonder what Michael O’ Leary would think.
• Note that Brent crude prices fell below the key $40 barrel level while Gold continues to soar.

Equities

• McDonald’s (MCD), one of the few stocks to perform of late plans to open roughly 500 new stores in China over the next three years, citing a senior executive. The firm said sales in China have not been affected by the economic crisis. Brian Durkin, vice president of development in China, pointed to 24-hour delivery, breakfast options and value meals as factors in helping the firm expand.
• After the bell, tech bellwether stock HP released some disappointing numbers as a stronger dollar hit profits. They also lowered guidance. The stock was off 6% on pre market trading.
• Troubled Swiss bank UBS (UBS) was back in the unwelcome spotlight again after it paid a $780m fine and named some of the clients they had helped evade US taxes.
• French bank BNP results were out this morning and they showed a Q4 loss of €1.37bn on the back of losses in investment banking (bad bets).
• Europe’s second largest insurer Axa (AXA) posted a smaller than expected loss, €1.24bn, but cut its dividend by 67%, and expected 2009 to be “challenging”. The stock is down 30% thus far in 2009.
• Food and beverage giant Nestle also gave a very cautious outlook for the year despite upping their dividend and reporting a 69% increase in 2008 profits.
• The UK’s Kingfisher (think B&Q) also came in with surprisingly good Q4 sales numbers, but one suspects this is all down to the weaker Sterling.

Data Today
There are a number of second-rank data releases today, with most interest perhaps in weekly jobless claims at 13.30 (consensus -620k) which is likely to underline the weakness in the labour market

US PPI, also 13.30 (-2.4%), will be overshadowed by tomorrow’s more important CPI release at 13.30 (1.5%).

The Philly Fed index is released at 15.00 (-25) where there are clear downside risks after the gloomy Empire State manufacturing survey published earlier in the week.

And Finally… He’s Searching For A Word That Rhymes With Banker

Disclosures: None

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