Börse&Märkte
Markets Still Riding Dovish Cental Bank Wave/JPM
Markets update
Stocks edge up in Europe, posting mild gains but upside momentum curbed by China’s finmin slapping the market by implying that growth in the world’s second largest
economy will come in around 7% rather than 7.5% forecasted back in March by the Chinese. These comments come ahead of next Monday’s official GDP figure from China so could be a clever ploy to
temper markets expectations. Interestingly, China is comfortable with the slower pace of growth as government looks to focus on banking sector reforms but the slowdown comes at the cost of the rest
of Asia who depend on China for trade and demand, i.e. Australia for commodities. Chinese growth fears in that case are weighing on European resources and commodity prices; gold off around 5 bucks
at the moment.
That being said, the risk tone remains broadly supported by continued central bank activism after Fed head Bernanke suggested the central bank is in no hurry to tinker the pace of asset purchases,
allaying concerns in the market that we may be in for the tapering as early as September. Additionally, the ECB and BOE also embarking on forward guidance last week, remaining highly accommodative
with measures, adds to the global cheer over the amount of liquidity still in the market place for now.
Interestingly, the market reaction to Bernanke’s unexpected comments regarding monetary policies on Wednesday was rather telling – the DJIA and S&P500 on
Thursday surged to fresh record highs on the back of his comments and we saw a stellar European session. Just as investors were getting to grips with the notion that the Fed will taper QE soon and
we will be operating in a world with reduced liquidity, the market reaction clearly suggests that investors still have a crippling addiction to liquidity. At the same time, we shouldn’t jump too
high on Bernanke’s dovish remarks as the Fed have clearly stated that tapering is dependent on economic data, particularly the performance of the labour market and inflation. If, we do indeed
continue seeing strong signals out of the US economy over the next month, investors cannot rule out that Bernanke will change his tune again and throw out some more taper-talk which will rile up
the markets again.
Lesen Sie auch
US earnings
The current bullish sentiment has also been supported by growing optimism over 2Q earnings season coming in better than expectations thanks to Alcoa kicking it off earlier this week in an upbeat
fashion. We have financial institutions JPMorgan and Wells Fargo publishing 2Q reports before the US opening bell – EPS for JPM expected at around $1.44 and Wells for around 94 cents, both tipped
to beat last year’s performance. But it’s not about headline figures as we know, as investors will be hunting for clues over how management feels about the pace of recovery in the US and the Fed’s
QE tinkering plans.
JPMorgan is likely to see earnings driven by the performance of its investment banking division, owing to the pickup in macro indicators while Wells being one of the biggest mortgage lenders in the
country should benefit on the recovery in the US housing market. Both reports will gear the market up for Goldmans and BofA earnings next week which should sing a similar tune, so any shortfall in
earnings from JPM and Wells could tarnish the current optimism we have over the US earnings season. On the macro agenda, UK construction output, euro zone IP and the Michigan confidence report will
be eagerly eyed.
G4S and SERCO scandal
On stocks, G4S and Serco share prices continue to feel pressure on claims that both hustled the UK government by overcharging on electronic tagging. Both saw stock prices plunge following the news
yesterday and its likely these allegations will be a major overhang for the stock price, until we hear of fines or lawsuits. Reputational damage here is likely to hurt both companies as a result,
particularly G4S following last year’s shambolic mismanagement of the London Olympics. Moreover, both companies have contracts with the government which will now all be under scrutiny so the plot
could thicken. And, it’s likely that if allegations are proved true, both may find it difficult to secure government contracts in the future, not only with the UK but other nations – both have big
operations in the US.
Invensys/Schneider tie up
Elsewhere, deal news helps instil some confidence in the market: Invensys has received an attractive 505p indicative offer from Schneider Electric, approx 17% premium to yesterday’s closing price
of 440p. Invensys has been subject to takeover speculation for some time, particularly after selling its rail division to Siemens last year for £1.7b, so
it’s not unexpected that it has a few suitors eyeing it up. Schneider’s offer makes strategic sense as Invensys will make a solid fit for Schneider’s automation portfolio, helping the company
develop a stronger software offering which will allow it access into key process markets. Invensys has been eyed before by Emerson Electric in the US but that did not result in a deal with some in
the market suggesting that Invensys’ large pension was a stumbling block for potential suitors.
That however has changed as the disposal of its rail division helped Invensys pay down around £490million of pensions deficit, raising interest in the company again. Schneider will no doubt have to
act fast! It’s got competition as there is no doubt that Emerson will consider flirting with Invensys management again with an offer this time around. Invensys may also have other suitors lined up
at the door with ABB and Seimens likely to give the company a look – but all any bidder will have to trump the 505p offer from Schneider which may be too compelling for Invensys to turn down. In a
consolidating industry, Schneider’s rational to buy Invensys appears to be in line with management strategy – under CEO Jean-Pascal Tricoire, Schneider has moved away from producing electrical
devices to an integrated engineering provider and software with the focus in emerging markets over developed markets. On the whole, encouraging to see M&A activity pick-up, demonstrating that
corporates are looking to put their money to work after years of hoarding it during financial crises.
Aktuelle Themen
8 im Artikel enthaltene WerteIm Artikel enthaltene Werte