European stocks will open slightly higher Friday. Investors are divided over direction following weak U.S. economic data and falling commodity prices across the board. However, Nonfarm Payrolls later will set the direction.
FTSE 100 Index futures are currently up 0.1 percent ahead of the open.
Today’s session will provide investors with a lot of new economic data to crunch going into the weekend. U.K. PPI Output in April is expected (08:30 GMT) to come out at 5.1 percent year-over-year compared to 5.4 percent in March giving Bank of England some tailwind for their decision to keep the benchmark interest rate low for the time being. Later German industrial production in March is expected (10:00 GMT) to come in at 10.3 percent year-over-year compared to 14.8 percent signaling the expected slowdown in Europe’s strongest economic engine. With the much worse than expected factory orders yesterday, the probability for a negative surprise in today's industrial production figures have increased so watch out as the figures could spark selling pressures in European stocks.
VISA and BASF support positive view on the economy, RBS is bleeding
VISA reported second quarter EPS of USD 1.23 compared to USD 1.21 expected in addition to the announcement of a USD 1 billion share buyback program. The results were driven by rising global card spending (as Mastercard’s earnings also showed) as the developing world is jumping on the bandwagon for electronic payments. The earnings release is a positive sign for consumer spending and stocks in general.
BASF reported first quarter EBIT excluding one-time items of EUR 2.73 billion compared to EUR 2.6 billion estimated by analysts driven by higher demand for materials and additives used in the production of cars and toothpaste. The company says it is seeing significant improvements in sales and earnings with a target of growing 2 percentage points faster than the overall chemical market. The earnings release is a bullish signal for global growth.
Royal Bank of Scotland reported first quarter net income loss of GBP 528 million compared to GBP 248 million expected driven by higher than expected charges for using a government insurance program for its riskiest assts.
Commodities are under pressure, Hong Kong has longest losing streak since 2003
The death of Osama bin Laden seems to have been the little push that toppled commodities such as Brent oil (see chart below) with latest economic data adding support for risk off in energy-related commodities. For the first time since November 2010 oil is now trading below its 60 trading day moving average. However, with the global economy still on track to deliver around 4.2 percent economic growth in 2011 oil will push higher as we go forward this year.
The declines in commodities (copper below 9,000 for the first time since mid-December) and weak economic data coming out of the U.S. this weak have taken risk appetite out of Asian stocks. This is evident by watching the leading HIS Index in Hong Kong that has been falling for eight trading days in a row. In general, we are underweighted emerging markets due to the rising food and energy prices.
Source: Bloomberg