BusinessDesk: Strength of corporate America has helped mitigate European debt concerns

It's a big week for American earnings and Apple is among those reporting.

Shares of Apple, which releases its first-quarter score after the closing bell on Tuesday, have suffered a drop of nearly 10 percent in the past couple of weeks.

Also on Tuesday, US Federal Reserve policymakers are set to gather and the post-meeting comments by Chairman Ben Bernanke on Wednesday will be closely eyed for any hints about a new round of supportive measures.

"When you have a market dominated by what central bankers are doing and saying, it is risky to be out," Quincy Krosby, market strategist with Prudential Financial in Newark New Jersey, told Reuters. "Nobody wants to wake up to learn that there was a big move."

The US will report its preliminary estimate of first quarter growth on Friday; expectations are for an annual rate of about 2.5 percent, compared with 3.0 percent in the fourth quarter of 2011.

Meanwhile, the American first-quarter earnings season is shaping up nicely; about 81 percent of S&P 500 companies that have reported so far have surpassed expectations, according to Thomson Reuters data.

Analysts raised their first-quarter earnings estimates last week, projecting per-share profits grew 3.3 percent, up from the previous week’s 1.7 percent estimate, according to data compiled by Bloomberg. Earnings will grow 8.8 percent for all of 2012, according to the data.

The strength of corporate America has helped mitigate the renewed concern about another flare-up of European sovereign debt concerns with both Spain and Italy struggling with rising borrowing costs.

In the past five trading sessions, the Dow Jones Industrial Average rose 1.4 percent, while the Standard & Poor's 500 gained 0.6 percent. The Nasdaq Composite Index, however, dropped 0.4 percent.

In Europe, the Stoxx 600 Index rose 1.7 in the past five days, recovering from four straight weeks of declines. The measure has lost 2.1 percent so far in April amid heightened concern about the region's debt problems, according to Bloomberg.

On Friday, Spanish notes fell, extending the longest run of weekly declines since January 2007.

“Underlying sentiment is still pretty nervous and people are still pretty worried about the fiscal prospects in Spain,” Nick Stamenkovic, a strategist in Edinburgh at RIA Capital Markets, a broker for banks, told Bloomberg.

Late last week, governments committed more than US$430 billion in fresh funds to the International Monetary Fund's efforts to prevent the euro-zone's crisis from spoiling the global economy.

Yet Europe's economic engine, Germany, seems to indicate a remarkable resilience. On Friday, German business and investor confidence as measured by the Ifo institute’s business climate index unexpectedly climbed to the highest level in nine months.

Germany is set to auction 3 billion euros of bonds maturing in 2044 this week.

The euro ended the week with a 1.1 percent gain for the five sessions.
In France, Nicolas Sarkozy is trailing in the early exit polls of the first round of the presidential election.

If he loses on May 6, Sarkozy would be the 11th euro-zone leader to be swept out since the start of the European Union's debt crisis in late 2009 and the first French president to lose a re-election bid in more than 30 years, according to Reuters.

Investors will also watch the UK's first quarter GDP numbers due Wednesday.

With expectations for 0.1 percent growth in the first quarter after the economy shrank by 0.3 percent in the final quarter of 2011, it won't take much disappointment to push the UK into a recession.

And the Bank of Japan on Friday is expected to lend the nation's lacklustre economy helping hand by further easing later this week.

(BusinessDesk)

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