Bears will be getting excited that another day of selling pressure may bring about the correction they have all been dreaming of.
The traditional first pitch of US earnings season was thrown by Alcoa last night and it was, in fact, a good one. With a comfortable earnings beat and a pledge to push into more sophisticated arenas, on paper at least it is a positive start to the earnings cycle.
Asian markets were nonplussed however, as weaker-than-expected inflation figures from powerhouse China dampened sentiment there, and the knock-on effect helps explain the underperformance of the FTSE today.
Insurers are feeling the brunt of the bearishness today. Admiral Group (-5%) is heavily lower having warned of a poor first half and a lack of decent growth outlook. It has been joined by Aviva (-3%) who, this morning, announced further belt tightening as part of a long-term turnaround strategy at its capital markets day. Randgold Resources (+2%) lead the risers as gold prices look to catch a bid in the wake of this uptick in market nervousness.
Whilst the real meat of US earnings doesn’t start to hit us in volume until next week, we are nicely poised having seen markets retrace and a little volatility creep back in. We are currently calling the US markets up slightly, with the Dow Jones at 16,920 up 15 points.
Shorts have had a tough time lately, but it is likely that recent days are more a healthy pullback rather than the start of something more, and until we get further into earnings season there is still little reason to think the markets have truly changed tack.