Domestic Earnings Season
July 26th, 2010 by Cale McCulloch
Strength in Asian markets looks set to continue this morning following a strong night in the US. With markets pushing higher by about 1%, erasing all of the years losses to date. Sparking gains were a continuation in the better-than –expected trend in earnings results, with some 85% of those which have reported topping the streets estimates, add to this the clarity that EU bank stress tests gave to the market and the bulls had the upper hand. Of the 91 banks tested, only 7 showed to be inadequately capitalised, needing to raise just 3.5 billion Euros.
On the earnings front, solid results out of Verizon Communications, McDonalds, and Honeywell led the way, while an announcement out of conglomerate GE stating they would increase the dividend by 20% showed companies were ready to start using cash to return value to shareholders after taking prudent measures in the thick of the Global Financial Crisis. Estimates show there is some 1trillion USD on the balance sheets of US companies that, when put to work could drive a M&A bull market.
This week will mark the beginning of domestic earnings season, with results due out of GUD and Australian Foundation Investment company due out today, with the likes of Alesco due out later in the week along with some others at the smaller end of town. Markets will be watching the 3rd Quarter sales figures due out of Wesfarmers this morning following disappointing sales figures from rival Woolworths.
We are approaching some key technical levels, with the US markets nudging through a drown trend last week, the key test will be 1105 on the S&P500, with Fridays close at 1102 putting us just one night from a clean break of the level that should see another 3% on the upside in the short term.
The local market looks set to push higher by about 40 points this morning according to the SPI, but strength in Asian markets at the open around midday should see short covering towards the close.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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