On 22 April, 2015 – European markets were mixed on disappointing earnings reports

Stocks in Asia Pacific and Europe were mixed Wednesday as investors continued to evaluate earnings. The situation in Greece also made investors wary. 
United States
Shares advanced as Visa’s potential expansion into China and talk of a turnaround at McDonald’s helped investors see the bright side of mixed quarterly earnings. Visa gained to hit a record of US$69.98 while MasterCard came shy of its all-time high after China said it would open up its market to foreign firms for clearing domestic bank card transactions. McDonald’s surged after it said it was working on a plan to reverse its shrinking sales. The Dow Jones industrials and the S&P both were up 0.5%. The Nasdaq added 0.4%. 
Investors focused on earnings as a slew of key companies reported fourth quarter results. Yum Brands was up after reporting higher global sales at Taco Bell and KFC. Chipotle sank after the company reported lower sales of pork because of a shortage of the meat. McDonald’s said that diluted earnings per share for the first quarter plunged 31% from a year earlier to 84 US cents. Revenue declined 11% from a year earlier to US$5.96 billion compared with forecasts of US$6 billion. In other earnings reports, Coca-Cola reported a rise in revenue for the first time in nine quarters, helped by a 6% rise in revenue from North America. Boeing reported a 38% increase in quarterly profit, helped by rising demand for commercial aircraft which were up 14% to 184. 
Facebook reported a nearly 42% increase in quarterly revenue, helped by a jump in mobile advertising sales. Net income attributable to stockholders fell to US$509 million or 18 US cents per share in the three months ended March 31 from US$639 million or 25 US cents per share a year earlier. Revenue rose to US$3.54 billion from US$2.50 billion. Revenue from advertising was US$3.32 billion, a 46% rise from a year earlier. 
eBay Inc reported a 4.4 percent rise in quarterly revenue, helped by higher revenue in its payments business, which includes PayPal. PayPal is set to be spun off later this year. EBay reported net income of US$626 million or 51 US cents per share for the first quarter ended March 31 compared with a loss of US$2.33 billion or US$1.82 per share a year earlier. Net revenue rose to US$4.45 billion from US$4.26 billion. 
March existing home sales jumped a better than expected 6.1% in March to a 5.190 million annual rate. 
Gold at the afternoon London fixing was down US$6.05 to US$1,189.25. Copper futures were down 0.9% to US$2.68. WTI spot crude was down 31 US cent to US$56.30. Dated Brent spot crude was up 81 US cents to US$62.89. The US dollar was down against the pound and the Canadian and Australian dollars. It was virtually unchanged against the euro. However, it advanced against the euro, yen and the Swiss franc. The Dollar Index was up 0.1%. The yield on US Treasury 30 year bond was up 9 basis points to 2.67% while the yield on the 10 year note was up 7 basis points to 1.98%.
Europe
Stocks were mixed Wednesday. Shares were weak in early trading sparked by several disappointing corporate earnings reports. Investors were also jittery after authorities in France announced that an “imminent” terror attack on one or more churches was thwarted after the arrest of an Islamic extremist with an arsenal of weapons. The markets were able to reduce their losses later in the day on signs of progress in Greece. European Central Bank Executive Board Member Benoit Coeure said that Greece exiting the euro area was not a consideration and urged the Greek authorities to take decisive action. The FTSE lost 0.5% and the DAX retreated 0.6%. However, the CAC and SMI added 0.4% and 0.6% respectively.
Minutes of the Bank of England’s monetary policy committee meeting held earlier this month noted signs of strengthening of the euro area which could benefit the UK economy in the long run. Domestic inflation is expected to pick up faster later on this year after remaining negative in the coming months.
Deutsche Bank advanced on reports it is poised to announce a settlement with US and British officials over allegations it tried to manipulate benchmark interest rates. Commerzbank also gained. Both RWE and E.ON finished lower on the day. Osram dropped after the lighting company said it would separate its general lamps business as part of its strategy to focus on automotive lighting and components. Kering tumbled after it reported a bigger than expected drop in sales at the Gucci luxury goods brand amid a slowdown in Asia. BNP Paribas, Crédit Agricole and Société Générale advanced. Tesco declined after the retailer reported a record statutory pre-tax loss of £6.4 billion for the year to the end of February.
Hargreaves Lansdown retreated on a broker downgrade. Richemont was up in Zurich. The company, which owns the Cartier, IWC and Piaget brands, said its net profit for the year would drop by 36% because of losses on financial instruments. Roche Holding climbed after the company said strong growth of its core cancer franchise pushed sales 3% higher in the first quarter of the year. It confirmed its full year guidance and suggested it would raise its dividend.
The Swiss National Bank announced Wednesday that it was considerably reducing the number of sight deposit account holders who are exempt from negative interest rates. Negative interest will now also apply to the sight deposit accounts held at the SNB by enterprises associated with the Confederation, including PUBLICA, the pension fund of the Confederation, the bank said in a statement.
Asia Pacific
Shares were mixed Wednesday. While Chinese and Japanese shares outperformed to hit multi-year highs, the underlying mood remained cautious elsewhere across the region after recent gains, driven by Chinese stimulus measures to spur lending and combat a slowing economy.
The Shanghai Composite jumped 2.4% and hit a fresh seven year high after the People’s Daily newspaper said in a commentary that the ‘bull run has just begun’ and there was no bubble. The current bull run “has support from China’s grand development strategy and economic reforms,” said an article published on its website. The Hang Seng was up 0.3%.
The Nikkei added 1.1%, hitting a fresh 15-year high closing above the 20,000 level for the first time since 2000. A weaker yen and encouraging merchandise trade data underpinned sentiment. Japan logged its first monthly trade surplus in nearly three years in March, helped by cheaper oil prices and a modest recovery in exports on the back of a weaker yen. The merchandise trade surplus stood at ¥229.3 billion, beating forecasts for a surplus of ¥48 billion.
The S&P/ASX lost 0.6% and the All Ordinaries 0.5% after first quarter consumer price data was interpreted as reducing the possibility of Reserve Bank of Australia cutting rates in its May meeting. March quarter CPI was up 0.2% on the quarter, unchanged from the previous quarter and was up 1.3% on the year. National Australia Bank dropped on a report it plans to further reduce its stake in US agribusiness bank Great Western Bancorp. ANZ, Commonwealth and Westpac also retreated. BHP Billiton declined after the miner raised its full year guidance for iron ore production after reporting a 20% increase in production for the March quarter. Rio Tinto declined while Fortescue Metals Group advanced.
The Kospi was virtually unchanged while the Sensex rebounded 0.8%.

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Flash PMIs will be released for China, Japan, the Eurozone, France, Germany and the US. The UK releases March retail sales. In the US, March new home sales and weekly jobless claims, money supply and Fed balance sheet will be released.
*Note — all releases are listed in local time.
Anne D PickerChief EconomistEconoday