Reply #48: GLOBAL MARKETS WEEKAHEAD-A (sour) taste of things to come

[Ghost Dog]

Fri Jan 15, 2010 3:18pm GMT LONDON, Jan 15 (Reuters) - Investors head into next week having had a small taste of what lies ahead this year, monetary tightening in a major economy -- and, frankly, they didn't like it.

They also had to deal with a disappointing start to an earnings season that is about to heat up, with big bank results to the fore. Again, they didn't like it.

The result has been that while the risk-asset rally that began in March last year has not been reversed, it has stumbled. World stocks as measured by MSCI .MIWD00000PUS were set to end the week flat while the dollar .DXY rose on Friday.

The week ahead could thus be a watershed, testing the sustainability of what have been entrenched investment patterns with more earnings, Chinese growth data and continuing worries about sovereign debt. One of the biggest drivers will almost certainly be the U.S. earnings season, which has got off to a rocky start.

Alcoa (AA.N: Quote, Profile, Research) disappointed and there were profit warnings from Chevron (CVX.N: Quote, Profile, Research) and, in Europe, Societe Generale. JPMorgan (JPM.N: Quote, Profile, Research), the second-largest U.S. bank by assets, had a better-than-expected profit, but put investors off with rising losses on mortgages and commercial loans.

Ahead lie IBM (IBM.N: Quote, Profile, Research), General Electric (GE.N: Quote, Profile, Research), Google (GOOG.O: Quote, Profile, Research) and a host of major banks, including Citigroup (C.N: Quote, Profile, Research), Bank of America (BAC.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), Goldman Sachs (GS.N: Quote, Profile, Research) and Wells Fargo (WFC.N: Quote, Profile, Research).

In purely numerical terms, most earnings are supposed to be spectacular because of a year-on-year impact. But investors will be burrowing deep for signs of real improvement.

"Markets will want to see evidence of strength in the private sector demand, because its important the economy stand on its feet after the public fiscal stimulus starts to fade which will probably happen around mid-year," said Geoff Lewis, head of investment services at JP Morgan Asset Management in Hong Kong. Continued...

/... http://uk.reuters.com/article/idUKLDE60E0VZ20100115