14th Jul 2014 11:30
LONDON (Alliance News) - US stocks are set to follow Europe higher Monday, also rebounding from an overdone sell-off last week, as investors await second-quarter earnings from the country's third biggest bank, Citigroup.
The futures market indicates that the DJIA will open about 68 points higher, while the S&P 500 will open seven points higher, and the Nasdaq Composite 18 points higher.
While the debt concerns caused by trouble with a bond payment at the parent of Portugal's largest bank caused less off a sell-off in the US last week than in Europe, Wall Street still suffered its worst week for some time. This has only served to raise hopes further for a strong second quarter earnings season to support the all-time highs previously being made by stocks in the US.
"The drop in stocks last week may actually favour more positive reactions to earnings this week since investors can buy on the dip rather than having to buy more overbought markets near the highs," said CMC Markets market analyst Jasper Lawler.
Citigroup is the first of the big US banks to report, with numbers out Monday and analysts looking for earnings per share of USD1.05, and revenue of USD18.93 billion, which would represent a 14% decline in earnings from the same period last year, says CMC Markets analyst Jasper Lawler.
"Decreases in loan activity, lower fixed income trading activity and ongoing regulatory fines have forced the bank into selling off assets and lay-offs," says Lawler. "With so many headwinds the bank faces a tough time ahead but with such a lowered bar for expectations, there remains some possibility for a positive earnings surprise before the open."
Ahead of the numbers, there are reports that Citigroup will announce yet another fine, from the Justice Department for USD7 billion, in settlement of a mortgage probe.
The US earnings will ramp up as the week goes on, with fellow banking groups JP Morgan and Goldman Sachs due to report, along with technology bellwether Yahoo! Inc and pharmaceutical group Johnson & Johnson.
Furthermore, while Monday is a quiet start to the week in terms of data releases, Tuesday brings all important retail sales data, as well as the semi annual testimony to congress by Fed Chair Janet Yellen.
"The first big day for the US comes tomorrow, with retail sales figures being released alongside manufacturing data," says Alpari market analyst Craig Erlam.
Leading in to the US market open, UK stocks are holding on to their morning gains. The FTSE 100 is up 0.6% at 6,732.74, the FTSE 250 is up 0.6% at 15,545.71, and the AIM All-Share is up 0.6% at 774.98.
UK energy provider Drax Group jumped to the top of the FTSE 250 by midday when the company announced that it will end up receiving a government subsidy that it had previously been deemed ineligible to receive.
The UK High Court has ruled as incorrect the UK Department of Energy and Climate Change's decision to deem the conversion of a second Drax power plant to burn bio-mass in place of coal as ineligible for subsidies under a new government support programme.
European majors also continue higher, with the German DAX 30 up 0.7%, and the French CAC 40 up 0.6%.
By Jon Darby; [email protected]; @jondarby100
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