29 April 2011 at 7:09 GMT
European stocks will open flat Friday as lower than expected first quarter U.S. gross domestic product put a cap on risk appetite despite the Fed’s statements about it being a transitory phenomenon. Can earnings once again fuel appetite for risk?
The earnings season has been very good
Yesterday saw yet a string of good earnings from European and U.S. companies with Deutsche Bank as one of the bright spots as their consumer banking division showed a strong performance. The earnings season in the U.S. has seen 77 percent of companies beating estimates, and downward revisions of earnings have been minimal, indicating rising input costs are pressuring companies but not enough for them to lower full-year guidance.
We have had Daimler out this morning with first quarter EBIT figures of EUR 2.0 billion compared to analysts’ estimates of EUR 2.0 billion. Profits came in at EUR 1.2 billion more than doubled that of last year on higher demand for cars in China.
On M&A, Total is out announcing to buy up to 60 percent of SunPower for around USD 1.38 billion signalling increasing interest in this booming renewable energy source.
However, it is unlikely that today’s session will be a huge party for investors such as the one they have in London, but nevertheless good earnings and economic data on Eurozone consumer confidence could set the day off to a good start.
Eurozone inflation is still accelerating, unemployment still high
Today, Eurozone consumer price index for April is expected (09:00 GMT) to come out at 2.7 percent year-over-year compared to 2.6 percent in March putting more pressure on the European Central Bank to keep raising interest rates. The pressure has so far presumably been driven by higher commodity prices which companies have to offset by raising prices for consumers, but the next wave of pressure could come from labour unions as unemployment keeps falling in Germany adding more room to ask for wage increases.
Eurozone unemployment rate for March (09:00 GMT) is expected to come out at 9.9 percent unchanged from February as weak economic growth is still unable to create jobs in the region.
A technology note: RIM is in trouble
Yesterday Research in Motion, the former king of business mobile phones, lowered its forecast for first quarter (ending May) earnings per share to USD 1.30-1.37 from USD 1.47-1.55 as demand for its BlackBerry is falling and to a larger extent than anticipated. The company faces steep competition from Apple and Google, and with this downward revision of earnings the company has lost vital creditability among investors. The shares plunged 11 percent in late trading after U.S. markets were closed.