QE expectations continues to fuel the risk rally in markets, market strategist Christian Tegllund Blaabjerg at Saxo Bank writes in Monday’s Wake-Up Call. He also points to tomorrow’s major earnings release by Intel
“This is very important for sentiment in markets and will fundamentally most likely provide a solid insight into how expectations will be in terms of sales growth in 2011.”
Christian Tegllund Blaabjerg
“European equity markets will most likely open around 0.2% higher today after a strong close in Friday’s US session on the back of expectations rising on the content of the QE package from the FED. Prepare for tomorrow’s earnings from Intel. This is very important for sentiment in markets and will fundamentally most likely provide a solid insight into how expectations will be in terms of sales growth in 2011,” Tegllund writes.
More market musing from Saxo Bank:
The earnings season does not get really exciting until tomorrow when Intel reports. Furthermore, the macro calendar is very, very light.
However, do watch out for the FED speakers today. While we think QE2 is now a near certainty, last week a couple of FED members did attempt to talk down the likelihood of more QE at the November FOMC meeting.
Nonfarm payrolls fell for the first time since December 2009 when you exclude temporary Census workers.
The decline of 18,000 jobs was due to a much larger than expected decline in non-Census government workers.
Private payrolls (64,000 vs. Saxo: 65,000) and Census workers (77,000 vs. Saxo: 80,000) came in as expected, but the 83,000 decline in non-Census government job positions surprised greatly to the downside as state and locals really cut back.
The unemployment rate did not increase as expected, but instead remained at 9.6% as the household survey was somewhat better than the establishment (nonfarm) survey.
The former survey saw employment increase by roughly 141,000 while the civilian labor force rose by 48,000, so the unemployment rate actually declined somewhat, but is still rounded to 9.6%. The so-called underemployment rate, which includes marginally attached workers, rose no less than 0.4%-points to 17.1%, which is the highest rate since April.
This was due to a large increase in persons employed ‘part time for economic reasons’ rose by no less than 612,000. In other words, more than half a million additional workers worked part time in September, but would rather have had a full time position.
The very poor labor market report caused equities to rally and stocks ended the day 0.5% higher in the US. Currently, stocks rally both on good news and on all the news, which confirms quantitative easing 2 will soon arrive.
The earnings season will be kicked off by Intel tomorrow, so look for this report. This is important due to Intel’s global exposure – both towards businesses and consumers.
Christian T. Blaabjerg
This week we will have a pretty decent indication how the big global corporates expect 2011 to perform in terms of sales and EPS growth. JPMorgan, Google and GE all reports this week and this will set the tone going forward in the earnings season.
The nonfarm payrolls Friday clearly was a bullish statement in terms of how you should expect the QE announcement in the beginning of November to turn out.
These expectations have so far lifted markets quite substantially and it is hard to envision how these expectations can be met.
By Christian Tegllund Blaabjerg
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Related Articles
- Has the Market Priced in Qe Already? (pragcap.com)
- “Goldman Finds That QE2 Is Now Mostly Priced In” and related posts (zerohedge.com)
- Man overboard? (ftalphaville.ft.com)
- Those Jobs Numbers Were Horrible, And The Fed’s Next Move Won’t Really Help Anything (businessinsider.com)
- Wall St Week Ahead: Fed to run the show despite big earnings (reuters.com)
How Banks Spin Their Earnings (And Make Media Dizzy)
About three years after mainstream media and the public in general suddenly discovered that we had a serious crisis on our hands – I’m still amazed and sometimes quite choked by the ignorance revealed in dealing with the banks and their reporting.
“A caricature is putting the face of a joke on the body of a truth.”
Joseph Conrad
In fact, I really can’t understand why so few have bothered to look up terms like “off-balance products,” “mark-to-market accounting,” or “cross-border financing.” This, in turn, makes it ridiculously easy for the banks to manipulate their official earnings reports.
So – with a little help from my friends – I’ll try to explain (one more time) what’s going on:
Not surprisingly, banks, in their earnings reports, are quick to highlight the areas of strength and downplay the weak points.
Well, here’s what The New Tork Times/DealBook has to say about it:
Financial firms and other companies can be especially creative when it comes to the headline number they report, that is the profit they showcase at the top of their releases.
Consider Citigroup, which announced its first-quarter results last Monday.
At the top of its earnings release, the bank trumpeted its net income was $3 billion for the period, up from $1.3 billion in the fourth quarter of 2010.
That would seem to be great news, with profit rising more than 130 percent from the previous quarter.
But investors and analysts typically look at year-over-year growth, not quarter-over-quarter growth.
Finding the exact number required some digging.
The headline number wouldn’t be all that notable, except for that it deviates from previous earnings announcement.
In both the third and fourth quarter of 2010, Citigroup highlighted the year-over-year comparisons.
Of course, they were favorable, with earnings rising over that 12-month period.
Citigroup is also an outlier among its peers that have reported so far.
Last week, JPMorgan Chase announced first-quarter earnings of $5.6 billion, contrasting them prominently with the $3.3 billion in the same period of 2010.
Bank of America — which like Citigroup had a profit drop on a year-over-year basis — provided both first quarter 2010 and fourth quarter 2011 as points of comparisons for its latest earnings.
Most news reports points to the fact that Bank of America’s latest earnings was lower than expected, but very few seems to have figured out what NYT/DealBook points out; the numbers are, in fact, far worse.
To highlight the seemingly collective ignorance in the mainstream media, here’s a few examples of the most influential Norwegian media‘s presentation of Citigroup and JPMorgan Chase:
E24.no is Norway’s largest financial news web.
“Citigroup Shuffles In Money” – nice, huh?
As you may notice, E24.no refere to “SIX News” as their source for this news article.
SIX News is a newly established financial news provider in Europe, own by six major global banks.
That’s journalism, for you!
DN.no is supposed to have the most capable financial journalist in Norway.
And DN.no seems to have figured out – all by them self(!) – that JP Morgan increased their earnings by 300% in 2010.
Impressive!
“The company can enjoy a very strong development in margins in the first quarter.”
Of course they can….
The website Hegnar.no is seen as the most specialized financial news provider.
The owner and publisher (and investor) Trygve Hegnar has a policy of not hiring journalist, only economists, to do the reporting.
Hegnar.no’s reporters makes it clear to everyone that both Citigroup and JPMorgan Chase deliver earnings that are better than expected.
I have to point out that the Norwegian financial news providers mentioned above are not more ignorant og stupid than most others.
To a certain degree I can understand that it’s easier to just publish a prepared press release, instead of analyzing the numbers by themselves.
But this has turned into a global, serious and dangerous problem.
A caricature is “putting the face of a joke on the body of a truth,” according to author Joseph Conrad.
It’s a pleasure to introduce you to my favorite caricature, the humble and social responsible British investment banker, Sir George, explaining the financial crisis from his point of view:
I guess no further comments by me are needed.
I just hope you are able to see the whole picture a bit clearer.
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Filed under International Econnomic Politics, Laws and Regulations, National Economic Politics
Tagged as Allegedly Unethical Firms, Bank, Bank of America, Business, Citigroup, Finance, Financial institution, Financial Markets, Income, International Econnomic Politics, International Politics, Joseph Conrad, JPMorgan Chase, Law & Regulations, Profit (accounting), Views, commentaries and opinions, Wells Fargo