Higher opening likely despite disappointing Philips earnings

European cash indices are expected to open higher Monday led by expected strong German Purchasing Managers Index (PMI) figures and European Industrial orders. Philips disappointed in its earnings release this morning and this could weigh somewhat negatively on the opening. Look for German PMI released at 0830 GMT and EC Industrial New Orders released at 1000 GMT. Otherwise look for earnings releases from Halliburton and McDonalds – both released before the opening of the US markets.

After a weak close of last week's markets, partly on the back of disappointing earnings from Goldman Sachs, we are in for another round of earnings releases this week from big corporations both in Europe and the US. This morning, however, attention should be drawn to German PMI and Eurozone Industrial New Orders. German Purchasing Managers Index PMI is expected to be released at the same level as the prior release namely 60.9, while Eurozone Industrial New Orders are expected to increase year-over-year from the prior reading of 14.8% to 17.4%. An increase of that magnitude, if realised, will be supportive for markets.

Philips was out this morning with a disappointing earnings result. EPS was realised at 1.54 EUR per share vs. an expectation of 1.828 EUR per share for the full year of 2010. However it's an improvement on last year's result of 0.443 EUR per share. Sales were also up, but clearly not by as much as earnings indicating that Philips has gained strong momentum again in its margin expansion.

Halliburton is out before the opening of the U.S. cash market and is expected to show strong results, though pretty much in line with Q4 2009, unlike Schlumberger last Friday. But this does not alter the outlook for more solid earnings. Watch out for Acergy, Seadrill and Petrofac. McDonalds is also out before the opening of the cash market in the U.S. and is expected to show modest growth both in earnings (EPS: 1.155 vs. 1.092 previously) and sales (6,195 bln. USD vs. 5,859 bln. USD in the previous quarter).