The steam went out of the New Year’s rally last week. Contributing factors to this may be a bad start to the earnings season in the United States. Alcoa, JP Morgen and Intel presented figures and were punished. Although Intel beat consensus estimates by a wide margin and delivered a strong guiding, the share fell 3% on Friday on the first trading day after reporting. New unrest in Greece put a damper on development. At the Oslo Stock Exchange oil prices also weighed.
“The stock market is supported of an explosive liquidity climate and a gradual improvement in the economy and company earnings. contrary, much has already been baked into the prices, and one might question the sustainability of the cyclical upswing. How will economy survive when the government has singed of ammunition and must tighten fiscal policy?”
(Article in English, link to full analysis in Norwegian)
The leading Western stock exchanges, fell 1.3% last week. A disappointing start to the the U.S. results season contributed. New concerns about Greece didn’t help, analysts at Orion Securities writes in todays analysis.
Brent Oil fell 5% to 77 on a disappointing update from the IEA. The IEA cut unexpected demand estimates for 2010, while it was expected an upward revision. Additionally, the IEA reported a further drop in the quota discipline within OPEC from 60% in November to 58% in December. OPEC production is now at its highest level in one year.
Despite falling international bourses and weak oil prices, Oslo Stock Exchange fell only 1.1%.
REC, Sevan and Yara distinguished themselves negatively with the fall of respectively 15%, 9% and 6%.
Marine Harvest, Golden Ocean, and DnB NOR pulled in opposite directions with a lift of 6%, 5% and 5%.
With the exception of oil, there was no clear trend in the commodity market.
In freight markets tank rates rose 13%, while bulk rates advanced 5%.
In the foreign exchange market the dollar strengthened, thanks to the problems in Greece.
In the bond market there a was strong demand for safe investments, and long prime interest rates fell sharply.
Cost of risks for corporate bonds were little changed, as Greek government debt exploded to record high levels.
“The steam went out of the New Year’s rally last week. Contributing factors to this may particularly be a bad start to the earnings season in the United States. Alcoa, JP Morgen and Intel presented figures and were punished. Although Intel beat consensus estimates by a wide margin and delivered a strong guiding, fell 3% on Friday as the first trading day after performance reporting,” the analysts at Orion Securities writes.
“New unrest in Greece put a damper on development. At the Oslo Stock Exchange oil prices also weighed.”
Has The New Year’s Rally Derailed?
“This depends to a large degree of earnings season Wall Street. This will kick in with full force this week. Why have U.S. investors reacted so cool on the results so far? One reason for this is that there’s barely any pessimists left. According to AAII’s opinion polls, the proportion of pessimists among U.S. investors decreased to its lowest level in many years in recent weeks. Historically, a level of pessimist’s under 30% is often coincided with market tops. This is because the pessimists are potential buyers, while the opposite is the case for the optimists.”
“What about the fundamental picture? It is fairly neutral. The stock market is supported by an explosive liquidity climate and a gradual improvement in the economy and company earnings. Contrary, much has already been baked into the prices. One might question the sustainability of the cyclical upswing. How will economy survive when the government has singed of ammunition and must tighten fiscal policy?”
Will Greece Undermine The Price of Oil?
“This could easily happen if Greece draws the Euro with it in the fall. The situation in Greece worsened last week as credit spreads on government debt widened to record high levels. As a result of the rising problems in Greece and a increasing gap between Euro Zone and the United States, there’s singns that the the Euro might pull over and down against Dollar. Historically, a rising U.S. Dollar has been negative for oil prices. Whether this will continue to be the case, remains to be seen, but we will take it as a warning for the Euro, commodity and commodity-related shares of smoldering fire in Greece increases in force and get out of control.”
Orion Securities has the following recommendations for stocks listed in Norway, and at the Scandinavian OMX Exchanges:
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