Daily: Focus on corporate earnings across the globe and better US data keep stocks in check – 25.07.2013

Source: Henderson Global Investors

Despite Wednesday’s earnings releases being among the strongest this quarter, with nearly 10% of the S&P 500 companies reporting, the index failed to cross the psychological barrier of 1700. Disappointing results from Caterpillar and AT&T seemed to overshadow other positive releases. Additionally, better-than-expected economic data on home sales and US manufacturing preyed on investors’ minds, with any improvement in the economy seen as likely to hasten the Federal Reserves’ tapering of monetary stimulus. This prompted selling in US Treasuries, causing their yields to spike. The Dow Jones closed down 0.2%, and the S&P 500 shed 0.4%, however, the Nasdaq fared better (flat on the day) helped by Apple’s robust results.

With a focus on corporate earnings across the globe, the price action in the US was followed in Asian trading overnight where major markets closed down led by Japan (Nikkei 225 -1.1%). The Japanese earnings season began on the wrong foot with camera maker Canon reporting weaker-than-expected sales, while a mini-stimulus package announced in Beijing failed to impress investors (Shanghai Composite -0.6%). European markets are trading down this morning – at the time of writing the FTSE Eurofirst 300 is down 0.2%; and the FTSE 100 down 0.3% amid negative earnings reports. Shares of BASF and Michelin slid on disappointing results. The release of German Ifo survey of business confidence, slightly higher than expected in July, has not materially changed sentiment.