The Banking and Strategy Initiative

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IT’S MONDAY! Apple reports earnings, Euro still trying the stratospheric trade (US Economy April 22-26, 2013)

Image representing Apple as depicted in CrunchBase

Image via CrunchBase

The week has a lot of quality big pharma earnings lined up for Thursday with expectations high after J&J’s beat last week but the week starts with a 20% expected downtick in Apple (US:AAPL) at just above $10 against last quarter’s $12 which itself was a harbinger of things to come. Coke feted its survival in Q1 earnings globally saved by the newly set up Pacific group organising volume growth leaders China and India in one group like Starbucks (US:SBUX) and despite negative volumes in Europe . The bottler reorganising on at Coke still leaves with 75% of Americas and Coke and other power brands saved their case volumes shipped in the Americas.

McDonalds’ (US:MCD) also peaked in the previous week even as the unimpressive, though expected earnings report on Friday, let the stock slide on open and yet closed above $100. A heavy CAGE and CAGNY rich Q1 set the tone for a spate of linked quarter comparable sales on the down and down (sic!)  but even as US economic data reported a persistent deflationary -0.2% for CPI last week, Big Mac was responsible for a slow start to Friday’s markets esp in retail stocks though US corporations from  Warren Buffet backed Heinz to Kelloggs and General Mills and Kraft/Mondelez could just provide the surprise US leadership reason in Asia in this decade. UK and Russia were outperformers for McDonalds in Europe while the Chicken flu scare is still alive and running down sales in its 6000 stores in China

Coming back to this week, Apple is unlikely to fare better in China where year/year growth in retail at 13% means squat as the share of retail sales in the GDP remains hardly significant and month/month growth is anemic at 0.2%. The G20 meeting is also on where Japan has been again given the thumbs up for its new coined monetary policy and buying of US Treasuries continues to pressure the currency to cross 100.(UPDATE 04/23: Over 100 bln in USDJPY=100 options expired  yesterday and cleared the way for a above parity trade)

One feels however the USDJPY trigger though still good for the one way move from 80 hardly a quarter ago, has been pushed to the brink not by the sharpness of the move but by the unbridled strength in the Euro as the region’s sure move  into negative growth for a longer period than expected or plannedlooks like a mirage on April’s last rush of positive end 2012 induced uppityup readings)  ruling out recovery in 2013. The strength of the currency expected to shore up the 17 members part of the Euro, could turn up to be the icicle that stabs the region intoa deflationary spiral even as US expects to return to positive growth led by a reannointing of GDP data before July 2013 under new standards adding billions in (FT:subscription required) creative works, Military and industrial R&D and underfunded pension plans as liabilities. Last week also saw a welcome challenge to einhardt and rogoofff’s claims to importance of austerity as other research found that countries like Australia continued to perform at higher ratios of debt to GDP

Caterpillar(US:CAT) started the day early keeping performance subdued on the back of challenges and fraud accounting issues in China with an EPS of $1.31 and revenues of $13 Bln but is positively a great bargain at $80 levels where it closed on Friday pulling its 2013 gudance to a low $57 Bln for another bad year in Capital goods and mining sectors looms over the world. In an unrelated move, Goldman Sachs commodities cut its earlier forecast n Copper prices for 2013 as well, making it clear that equities would also be welcome to follow south till a clearer picture emerges. One feels markets are now overtly joyous though suppressing the volatility smile in the Fed not having turned down the monetary exodus for the US Economy

Markets start the week at 14500 levels on the Dow after last Tuesday’s  reported  home starts limited growth ( a large 30%) to multi family units or apartments  and the negative CPI data was led by a 4.4% drop in Gasoline prices and if consumer sales data in retail series’ does not improve now then the 8:30 report of the Chicago NAI may indeed become the benchmark for the year’s high not just in the now ready to correct equities but in GDP growth forecasts as well.  Trade data and CPI data out of europe were not exceptional but were almost positive last week but US leading indices turned negative and the philly index came back to underperforming at a low 1.3 China manufacturing PMI tonight is followed by US Manufacturing data tomorrow

The tech quarter reported on the heels of declining C shipments and upbeat bank results that dominated the starting run of results season with strong performances from mortgages at the end of HARP and HAMP while trading incomes remained weak even at highly profitable Goldman Sachs and others. europen banks do not print full results for each quarter and ill issue trading statements outling the general business trends for each segment starting with Barclays this Wednesday. and european retail sales data the rest of the week. Purchase MBA and New Home Sales data are likely to remain negative and early reports from Auto sales could likely report a correction after an amazing performance in March as April draws to a close and refinancing share of home business keeps coming down with Government intervention completed. The year could see a jumping MichiganConsumer Sentiment still in the 70s but any underperformance on that front is likely to be long lasting at this time after a  long cycling of failed recovery attempts by the consumer . The net employment situation report is due in two weeks and the Fed is also seriously considering withdrawing the ne monetarist stimulus of $85 B to bring back interest rates on the up

Yahoo reported a 36% jump in earnings on $1.1 B revenues under new management but Display ads revenue fell by another doubledigit score rattling Marissa Meyer’s cage while Intel promised to look better despite continued pressure from competitors’ sales on mobile devices.  Google also reported a year/year earnings jump of 31% but revenues were slower than expected at $14 B for its $3.90B bottomline. Intel (US:INTC) reported weaker margins down to 56% in Q1

Amazon will start the new year with a not unexpected slow Q1 after a strong holida y season performance and reports this Friday

Existing Home sales data is reported at 10 AM and is expected to stay over the 5 M sales mark in annual run rate

The CFNAI has fallen froma positive 0.44 to a negative 0.23 for the month and follows on negative economic reports from last week showing that the over 100 national indicators taken for the survey have definitely nosed down in the month. Meanwhile, UK is expected to put its 2012 blues behind it when it reports estimates on Thursday


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