26 January 2012 at 12:29 GMT
3M and AT&T report earnings, lots of US economic data on tap
In pre-market 3M and AT&T, two major US companies, will report earnings with 3M expected (12:30 GMT) to report 4Q EPS of 1.31 up 2 percent from last year. AT&T is expected (13:00 GMT) to report EPS of 0.43 down 22 percent from last year. Overall, 124 companies out of 500 have reported 4Q earnings with an aggregate surprise of 3.8 percent and a surprise ratio of 67.7 percent, so a pretty decent earnings season so far.
Earnings are important but today economic data could steal the spotlight. For an overview please see our new
Financial Calendar.
Fed rate outlook supports risk assets
The Fed's decision to keep rates low through 2012, for better or worse, shifted the mood among investors to a more positive tone adding fuel to US stocks which carried over into the Asia and European session with the Euro Stoxx 50 Index up 1.2 percent. For one opinion on the Fed's outlook read
this comment from our FX strategist, John Hardy.
No matter what, the Fed's forecast is not very useful in the sense that the standard error on three year forecasts is extremely high and no model can precisely forecast an economy in a constant dynamic rotation cause by billions of human actions every day. The most likely scenario is that the future will change materially from the Fed's current view and that will in the end change their rate policy. 2013 could be the year when they hike rates by 25-50 basis points just to indicate that money is cheap but not entirely free, and certainly not forever. Nevertheless, at the end of 2012 we will be much wiser on US employment and core CPI data, and at that point we can (and the Fed) better gauge where interest rates should be headed.
Nokia and Nintendo got the same punch in the gut
Nintendo reports FY11 net income loss of JPY 65 bn. which is worse than the JPY 20 bn. loss estimated. The driver is fierce competition from Apple and Google that are changing the gaming market with their new smartphones.
Nokia is also under pressure from Apple and Google, witnessed by today's earnings release that showed 4Q net income loss of EUR 1.1 bn. compared to an estimated loss of EUR 90 mn. However, operating margins were a little better than expected and investors are betting that the company's new smartphones will change the game. We are not convinced yet as we want the hard facts instead of reviews and talks.