Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

martedì 10 luglio 2012

Merket Comment - July 10

(Marco Bonelli) What does the uptrend from 2009 have to do with Q2 earnings?

The last three years represented the time of 15 to 20% earnings growth. The bull market between March 2009 and March 2012 reflected this trend to a large degree, with a little, well-known interruption in fall last year. This technical and symbolic trend lasted as long as companies reported record earnings quarter after quarter. 1Q12 earnings, although having been reported way higher than expected (+6.3% year-over-year growth) already showed a break of the double-digit growth trend that everybody got used to. 2Q12 will show an even sharper deceleration of the trend (and it doesn't make a difference if actual earnings will be higher or lower than current growth estimates of -1.8%). All major indexes broke below their 2009 uptrend in the sell-off last year but managed to advance back to these levels during the rally earlier this year. Some indexes like the Nasdaq broke above (and dropped again below in May), others just traded around the trend but the sharp deceleration of earnings growth will make it highly unlikely that the major averages will trade within or even close to the trend from 2009 going forward.

More specifically, while most indexes already trade below, the NDX traded back to the original trend from 2009 (which, depending how you draw the line, either runs slightly below 2650 or slightly above 2700) but, judging from earnings pre-announcements in the technology sector so far, will have difficulty advancing higher from here, if earnings continue to be viewed as one of the driving forces. Going into even more detail (and maybe I don't make to many friends mentioning this), in the market rebound from June, AAPL also traded back up to its original uptrend from 2009, which it broke during the general sell-off in May. Will the stock price stay at or above the trend and even move higher towards its all-time highs? A lot depends on Q2 earnings, reported on July 24...

In terms of sentiment, the pattern over the last quarter was that when earnings estimates got reduced, a certain point got reached when estimates were too low, companies were able to handily beat reduced estimates that were then celebrated as positive surprises and driver for a market rally. This worked until 4Q11 and to a certain degree in 1Q12 and not surprisingly, many market participants still expect this pattern to work in the Q2 earnings reporting season that got opened by AA yesterday (that (un)surprisingly "beat" estimates on back of continued strong demand from the automobile and aerospace industry). A sharp slowdown in global economic growth, weakness in Europe in particular, a sharply higher US Dollar, price (and with that, margin) declines and limited potential to further cut costs will most likely put substantial pressure on Q2 earnings and revenues and the point may be valid, that the usual psychological pattern might not work anymore in this reporting season! On top of that, investors face the risk that companies continue to sharply reduce guidance for Q3 and the whole year.

In the meantime, a sharp decline in the NFIB Small Business Optimism Index for June and substantially lower than expected trade data from China send a reminder of the fundamental environment, globally and domestically. Still ongoing expectations for further stimulus measures from governments and central banks seem to offset most of the macro-economic concerns at the moment. At the same time, dramatically lower earnings estimates are part of the general perception that sentiment among market participants is quite bearish - a dangerous and misleading view!

Trade well.

(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own.)

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