Global Investing

Big Five

April 20, 2009

Five things to think about this week:

EARNINGS DELUGE
– A heavy U.S. earnings week looms and the European reporting calendar is picking up. While more banks and financials will be reporting (e.g. Bank of America, Bank of New York Mellon, Credit Suisse and a trading update due from Barclays), results will start flowing from a wider range of sectors in both the U.S. and Europe (ranging from Apple and IBM to Glaxo SmithKline, Du Pont, Coca Cola). Health of the broader economy on display.

MACRO SIGNALS
– The more mixed signals that earnings send, the more investors are likely to look to macro and other indicators as a cross-check of whether the stock market rebound is sustainable and whether the economy is anywhere near an inflexion point. Flash PMIs and Ifo for April will give an early indication of how economic activity was faring as Q2 got underway. Trade data from Japan is also due for release.

FISCAL HELP
 – The UK budget on April 22 is expected to issue grim forecasts and extend a helping hand to some sectors, such as autos. The fiscal presentation will keep the spotlight on the limited room for budgetary manoeuvre in Britain and elsewhere with past bailouts and support measures leaving tough decisions to be made on public spending, taxes, etc.

G7-IMF
– The G7 finance ministers’ meeting in Washington comes soon after G20 earlier this month and therefore is unlikely to pull any rabbits out of hats. Moreover, there appears to be a less obvious need to spotlight FX given subsiding implied vols for major FX rates and the U.S. Treasury statement that China is not manipulating FX. Markets are looking for followthrough on G20 pledges.

EMERGING OPPORTUNITY
 – Emerging markets have proved resilient in the earnings season, withstanding occasional down days on major indices and most recently drawing support from nascent signs that the Chinese economy has put its worst quarter behind it. Investors’ willingness to look anew at the safer parts of the emerging universe is prompting some sovereigns to use this window of opportunity to launch eurobonds or look into doing so.

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