Equity markets remain broadly range bound as investors take in a series of contradictory information particularly regarding earning reports. It was surprising that given the robustness of the earnings from Goldman Sachs and Intel that US stocks markets did not make further gains. Admittedly, some of this good news had already been discounted in Monday’s price action but given that the earnings season has broadly started with more positive surprises then negative whilst taking into account we are at the very early stages this lack of positive price action is becoming worrisome, particularly if earning results continue to beat expectations. A failure to advance under these conditions would bring further concerns.

The contradictory information was not just levelled at earnings yesterday but the economic data also brought out a few surprises. Of note was US core PPI which rose above expectations. The analysis of the breakdown of this component indicated that the rise was driven by higher passenger car (+2%) and light truck (+3.4%) prices. Given the doldrums that the car industry has found itself in over the past year this rise in prices is somewhat surprising and unlikely to last but it did provide some substance for those who believe inflationary pressures are creeping back into the system. In the battle between inflation/deflation the market consensus remains that deflationary pressures are still more powerful, this will become increasingly evident as wage deflation takes a firmer grip of household incomes.

Sources: Reuters: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia:

Please note this report provides a guide to some of the relevant areas that individual investors should consider discussing with an authorised adviser in relation to their specific circumstances, it does notconstitute individual advice. As a result no action should be taken or refrained from being taken as a result of its content.