Member Article

Upbeat US earnings offset disappointing economic data

The much anticipated Spanish bond auction went relatively well, with Madrid selling €2.5 billion (collectively) of 2 and 10 year bonds at average yields of 3.46% and 5.74% respectively. Demand for the debt was strong, although many highlighted that this could be distortive given the relatively small amount of bonds on offer. Combined with good demand at a French auction of longer term notes, markets breathed a sigh of relief that the hurdles were cleared.

As we approached the US open around midday we leant of some disappointing news on the American economy. First were jobless claims figures, with initial applications for unemployment benefit only falling marginally to 386,000 over the previous week, above forecasts that had anticipated a fall to 370,000. It was followed by data for existing home sales, an annualised figure for the number of residential buildings that were sold during the previous month. The figure of 4.48 million was a fall from the previous month and well below forecasts. Along with a weak Philadelphia Fed Manufacturing index, the figures added to recent data that suggest there is still a long way to go in the labour and housing markets, even after the progress that has been made in the last few quarters. The data was however largely offset by upbeat quarterly results from Bank of America and Morgan Stanley, both of whom beat earnings and the latter up around 2.5% whilst BoA made marginal gains. Ebay posted an impressive 15% gain in early trade as its results were well received by investors who learnt of a 20% rise in first quarter profits, and an improved full year outlook, following a strong performance in its PayPal division.

Global indices were largely flat, the UK finishing pretty much where it opened at 5745 (although trading higher for most of the day) and US indices echoing this performance at the time of writing. European stocks fared much worse however, with the French and Spanish indices lower by around 2% even after relatively successful auctions.

This was posted in Bdaily's Members' News section by James .