25.10.13 Friday Morning

With very little else to focus on all week, investors have been closely studying corporate results in the knowledge that they will bare a considerable influence on the markets. Asian shares traded lower overnight after several companies released disappointing earnings with 60 percent of the 73 companies in the MSCI Asia Pacific Index that have reported quarterly results this earnings season missing expectations. Many of the export-driven Japanese companies like Canon had the weakening yen supporting them earlier in the year but that is now stagnating. People are starting to reassess those shares that have had that support.

However, in the U.S. the S&P 500 index has surged 6 percent over the previous two weeks, capped by a record close of 1,754.67 on Tuesday. This comes on the back of solid earnings and expectations that monetary stimulus will be in place for the foreseeable future after weak data, principally in the form of this Tuesday’s disappointing non-farm employment data. Earnings beat analyst estimates at 74 percent of the 141 companies in the S&P 500 that have released their results so far this reporting period, while 53 percent exceeded sales projections.

Whilst early forecasts pointed to an increase in U.S. workers in September, with the jobless rate expected to remain at its lowest level since 2008, the data had proven to be surprisingly disappointing with the actual employment change printing at 148k, falling well short of the 182k estimate. More positively, the unemployment rate has fallen slightly from 7.3% to 7.2%. The October employment report will be pushed back to Nov 8th from the original Nov 1st date.

The focus now will be on how the world’s largest economy can bounce back from the damage caused by the fiscal impasse. Last week President Barack Obama signed legislation that funded the government through to January 15th, suspending the nation’s $16.7 trillion debt limit. With the budget dispute more than likely trimming fourth-quarter growth, Federal Reserve policymakers are expected to wait until early next year to begin reducing stimulus - especially now considering the weak non-farm data.

The report suggested the economy was losing momentum even before the U.S. fiscal standoff that partially shut down the government for more than two weeks, lending credence to the central bank's decision to hold off on reducing its stimulus. The majority of economists surveyed believe that the Fed will reduce monthly bond purchases to $70 billion by March 2014.

Fed policy makers are scheduled to meet October 29th-30th, when they will evaluate the strength of the recovery with a less complete set of figures than usual due to the 16-day partial government shutdown that caused the suspension of reports and collection of data.

The euro remains steady at $1.3812, not far from a two-year high of $1.3826 touched on Thursday and shrugging off data showing the pace of growth in euro zone business unexpectedly eased this month.

Stock of the Week: Aberdeen Asset Management + 9.71%

Aberdeen Asset Management aims to become the biggest fund manager in the UK, after making a swoop for Lloyds Banking Group’s investment arm. The FTSE 100 firm has confirmed it is in talks to buy Scottish Widows Investment Partnership. Under Aberdeen’s plans, it will issue new shares to Lloyds, and make deferred cash payments linked to the performance of the business over several years. Based on the fund manager’s market value of £5billion, Lloyds could hold a 10 per cent stake in Aberdeen.

Next Week’s Notable Economic Data:

Monday –

• USD – Pending Homes Sales m/m

Tuesday –

• USD – Core Retail Sales m/m
• USD – PPI m/m
• USD – Retail Sales m/m
• USD – CB Consumer Confidence

Wednesday –

• USD – ADP Non-Farm Employment Change
• USD – Core CPI m/m
• USD – FOMC Statement

Thursday –

• JPY – Monetary Policy Statement
• JPY – BOJ Press Conference
• CAD – GDP m/m
• USD – Unemployment Claims

Friday –

• AUD – PPI q/q
• CNY – Manufacturing PMI
• GBP – Manufacturing PMI
• USD – ISM Manufacturing PMI

Next Week’s Notable UK Earnings:

Monday –

• Aggreko Interim Management Statement

Tuesday –

• Standard Chartered Q3 Interim Management Statement
• BP 2013 Q3 Earnings Release
• Lloyds Banking Group Q3 2013 Interim Management Statement
• Stagecoach pre-close trading update

Wednesday –

• Barclays 2013 Q3 Interim Management Statement
• African Barrick Gold 2013 Q3 Earnings Release
• Standard Life 2013 Q3 Interim Management Statement

Thursday –

• BG Group 2013 Q3 Earnings Release
• AstraZeneca 2013 Q3 Earnings Release
• Afren 2013 Q3 Interim Management Statement
• Smith & Nephew 2013 Q3 Earnings Release

Croda International  2013 Q3 Interim Management Statement