World Week Ahead US bank earnings in focus

US fourth-quarter earnings season picks up speed in the coming days with some of the major banks reporting.

A slew of banks are set to report this week, including Goldman Sachs, JPMorgan Chase, Bank of America, Citigroup and Morgan Stanley. Earnings for financial companies in the S&P 500 grew 16 percent in the fourth-quarter, according to data compiled by Bloomberg.

Still, Wells Fargo’s earnings, reported last Friday, disappointed on margins and mortgage applications.

“The banks have a read on the economy, on the health of consumers, on the health of demand,” Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, told Reuters.

The first week of the earnings season went relatively well, taking into consideration that earnings expectations had been lowered drastically in recent months. Of the 27 S&P 500 companies that have posted earnings so far, 81 percent surpassed analysts’ estimates and 67 percent reported a profit increase, according to data compiled by Bloomberg.

General Electric, eBay and Intel are also due to release their results in the coming days.

In the past week, the Dow Jones Industrial Average advanced 0.4 percent, as did the Standard & Poor’s 500 Index. The S&P 500 ended the week at 1,472.05, just shy of the five-year closing high reached on Thursday.

Things are looking up for US stocks in 2013, according to Margaret Patel, senior portfolio manager at Wells Capital Management, which oversees US$331 billion in assets.

In the week ended Wednesday, the inflow into US stock mutual funds was the biggest since May 2001, and the investment of money into equities funds was the biggest since mid-2008, according to Thomson Reuters’ Lipper data.

“We are at an inflection point where, especially in the US, you’ll start to see net inflows into equities,” Patel told Reuters. “The risk-taker will be rewarded this year.”

On the economic front, reports released in the coming days include retail sales and the producer price index, both due Tuesday, the consumer price index and industrial production, both due Wednesday, as well as housing starts and the Philadelphia Fed Survey, both due Thursday. The Beige Book is also due on Wednesday.

First on Monday, Federal Reserve Chairman Ben Bernanke is scheduled to speak at the University of Michigan.

This week the Fed is set to buy as much as US$9.75 billion in longer-dated debt, part of its bond purchases under the quantitative-easing strategy.

In Europe, the Stoxx 600 Index shed 0.3 percent last week.

Even so, European Central Bank President Mario Draghi’s comments that the euro zone economy should gradually recover “later, in 2013” helped underpin the single currency. The euro strengthened 2.1 percent against the greenback in the past five days.

And solid demand for last week’s government debt auctions, including from Spain, Italy and Ireland, highlighted that a certain level of confidence has indeed returned to the euro zone.

“The market has been more upbeat about the euro region and that benefits peripheral assets like Spanish debt,” Padhraic Garvey, the head of developed-market debt strategy at ING Bank in Amsterdam, told Bloomberg. “We expect this to continue in the first half of the year. There’s a growing market view along the line that there’s enough ammunition on the table to solve any immediate problem the euro zone might have.”


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