01 February 2012 at 13:01 GMT
Earnings season in the backseat as serious economic data are out today
As we said in our
macro update earlier this morning, there are three numbers to watch today: ISM Manufacturing, ADP employment and Portugal's debt auctions.
Portugal's debt auction saw yields on its May 2012 bills of 4.07 percent compared to 4.35 percent on January 18, so a slight improvement and at least not something negative for the market.
ADP employment figures for January are next up and expected (13:15 GMT) to print 182K down from December's super number of 325K (see chart below). Please keep in mind, though, that a 182K increase in employment is a solid number. Read our take on the ADP numbers when they are out in our next macro update.
Source: Bloomberg
Later in the session, the ISM manufacturing index for January will take the spotlight and is expected (15:00 GMT) to come out at 54.5 up from 53.9 in December signalling that US manufacturing is continuing to expand. We will be out with a comment on the number following the release.
While the earnings season is importan,t nothing beats ADP employment (as precursor for Nonfarm Payrolls on Friday) and ISM manufacturing, and those two numbers will set the tone for the rest of the session. S&P 500 index futures are currently up 0.7 percent, so watch those futures when the ADP numbers are released.
European stocks advance on China, financials are up 2.4%
China's PMI figure for January printed 50.5 up from 50.3 in December, fueling sentiment in the European session with the Stoxx 600 up 1.6 percent, as financials hammer on with a 2.4 percent gain. Societe Generale (+5.3%), Barclays (+4.9%) and BNP Paribas (+4.2%) are the best performers.
French banks in particular have come back from the dead with Societe Generale up 43 percent since its lowest point in January (see chart below), but there is still a long way back to former market values.
Source: Bloomberg
Ouch Amazon! Shares are down 8% in German trading
The fast growing retailer in the world, Amazon, surprised the market negatively after the close as the company reported sales in 4Q of 17.4 bn. compared to 18.3 bn. estimated by analysts. On the bottom line the miss was even bigger, as net income fell 57 percent to 177 mn. from 416 mn. last year. The drivers were higher operating expenses tied to the Kindle Fire product currently selling below its production cost and less-than-expected revenue from digital media.
The problem for Amazon is that investors have so far accepted the lack of earnings as long as sales kept pace with estimates, because they believed Amazon will eventually be able to increase profit margins at a latter point as its critical mass increases. But when sales miss as they did last night, investors are lethal and the shares are down 8 percent in German trading. When a company trades at 123x next year's earnings you have to deliver on sales growth, otherwise growth investors will dump your sales story and the shares with it.
Look out for action in Amazon today, as we expect volume to very high. For short-term traders there may be opportunities.