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Navigating noise in earnings revisions
There can be little doubt the global growth picture looks weaker than it did a few
months ago, when the problems in Europe seemed less extreme and the slowing
in US growth was attributed to weather and the Japanese earthquake. Even the
Fed admits the growth slowdown was due to more fundamental problems.
Given the apparent slowing of developed world growth, Peter Eadon-Clarke is
on alert for a negative turn in the earnings revision cycle. His data shows Japan
is recovering from the downward revisions post the March disasters. Europe is
weaker than the US as a result of sovereign debt concerns. >> Read Report
On the US, he says earnings revisions are solidly positive. That said, he believes
the OECD Composite Leading Index is a lead indicator of earnings revisions,
and the index is trending down and moved into negative territory in June. Given
the negative impact of the recent volatility on an already weak US consumer
psyche, plus the fact that current rates of employment growth are insufficient to
drop the unemployment rate, and a fall in the revisions ratio seems likely.
The equity market has reacted to what they see coming – a lot of negative noise
as the earnings revisions are forced onto the negative. Whilst the equity market
is at deep value territory, it will be difficult to get a sustained market rally in the
face of negative revisions. The Fed however is doing its best to make safe
havens win the ugliness contest – with 10yr treasury yields actually below the
S&P500 dividend yield. So in my view whilst it is popular being a saver, it is
definitely not rewarding. The equity market bottoming process is well underway.
Highlights
Duncan Hobbs says China copper imports rose in July, despite the
headwinds, and believes there will be more buying in coming months.
In a review of earnings season for China’s cement sector, Pelen Ji says
Anhui Conch (914 HK) stands out as safest in a volatile market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Navigating noise in earnings revisions
There can be little doubt the global growth picture looks weaker than it did a few
months ago, when the problems in Europe seemed less extreme and the slowing
in US growth was attributed to weather and the Japanese earthquake. Even the
Fed admits the growth slowdown was due to more fundamental problems.
Given the apparent slowing of developed world growth, Peter Eadon-Clarke is
on alert for a negative turn in the earnings revision cycle. His data shows Japan
is recovering from the downward revisions post the March disasters. Europe is
weaker than the US as a result of sovereign debt concerns. >> Read Report
On the US, he says earnings revisions are solidly positive. That said, he believes
the OECD Composite Leading Index is a lead indicator of earnings revisions,
and the index is trending down and moved into negative territory in June. Given
the negative impact of the recent volatility on an already weak US consumer
psyche, plus the fact that current rates of employment growth are insufficient to
drop the unemployment rate, and a fall in the revisions ratio seems likely.
The equity market has reacted to what they see coming – a lot of negative noise
as the earnings revisions are forced onto the negative. Whilst the equity market
is at deep value territory, it will be difficult to get a sustained market rally in the
face of negative revisions. The Fed however is doing its best to make safe
havens win the ugliness contest – with 10yr treasury yields actually below the
S&P500 dividend yield. So in my view whilst it is popular being a saver, it is
definitely not rewarding. The equity market bottoming process is well underway.
Highlights
Duncan Hobbs says China copper imports rose in July, despite the
headwinds, and believes there will be more buying in coming months.
In a review of earnings season for China’s cement sector, Pelen Ji says
Anhui Conch (914 HK) stands out as safest in a volatile market.
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