Fed says nothing new, markets react positively

European stocks will open higher Thursday, following the tone set by the Asian markets after the US Fed confirmed previous statements about inflation and the end to QE2. Both are positive for stocks in the short-term.

The FTSE 100 Index futures are currently up 0.4 percent ahead of the open and several important earnings releases have just ticked in:

• Deutsche Bank reported Q1 net income of EUR 2.1 billion, compared to EUR 1.8 billion estimated by analysts, driven by a strong performance in its consumer banking and asset management divisions. The bank’s earnings are in sharp contrast to the latest earnings releases from UBS, Credit Suisse and Barclays that all reported falling net income. Deutsche Bank’s earnings release looks strong and definitely bullish for stocks in today’s session.
• TSMC reported Q1 net income of TWD 36.2 billion, compared to TWD 35.3 billion expected, on global demand for computer chips. The company says the Japan earthquake will not impact supply. This earnings release is bullish for global growth and stocks in general.
• SAP reported Q1 net income of EUR 403 million compared to EUR 496 million expected.
• Nordea Bank reported Q1 net income of EUR 740 million compared to EUR 712 million estimated by analysts.
• Sanofi reported Q1 net income, excluding one-off items, of EUR 2.2 billion compared to EUR 2.1 billion expected.
• Novo Nordisk reported 1Q net income of DKK 4.1 billion compared to EUR3.9 billion estimated.

Will Germany continue to add jobs?
Most important economic data from the Eurozone today is the unemployment change and rate figures for April (07:55 GMT) expected to show -37K and 7.0 percent respectively. These figures will show that Europe’s only turbo engine, Germany (along with Sweden, to an extent), is continuing its path with falling unemployment, a trend that started back in the summer 2009. Later in the session it is all about U.S. first quarter gross domestic product, but we will touch the subject later in our Equity Update.

Fed: inflation is transitory, QE2 ends through June
Inflation has been on everyone's lips lately but Ben Bernanke said once again that the Fed believes it is transitory. He also stated that the Fed does not believe the end of QE2 will have any significant impact on markets. This statement is very much in line with what Blackrock’s CEO Larry Fink said before the weekend. One of the reasons is that banks have USD 2 trillion worth of loans and structured bonds that are maturing within the next 12 months and this capital needs to go to work and will support demand in U.S. Treasuries. Ben Bernanke’s speech fuelled demand for commodities and precious metals with Brent oil prices at USD 125.60/bbl and gold at USD 1,530/oz.