Tuesday, January 21, 2014

Soft China Growth Data, Weak Earnings Drag Stocks

US markets were closed Monday and will reopen today. With no major economic data scheduled for release, earnings will assume control of the equity driver’s seat. Johnson & Johnson and Unilever are scheduled to announce their quarterly results.

Europe equities ticked down, dragged by Deutsche Bank’s surprise quarterly loss and soft China growth data (*more below in Asia). The Stoxx 600 fell 0.1%, while Germany’s DAX dipped 0.3%.

Deutsche Bank posted a EUR1.15 billion loss, citing weakness in its fixed-income business, heavy litigation costs and large restructuring-related spending. The bank warned about a challenging 2014, but promised it would meet its target in 2015. A separate report from the Wall Street Journal said Germany’s top banking regulator plans to send investigators to Deutche Bank’s offices as part of a global probe into currency market manipulation.

Japan stocks dipped 0.6%, weighed by a sharp drop in Nintendo after it downgraded its outlook. The game maker said it now expects a loss of around JPY25 billion when it reports its full year results in March, retreating from a JPY55 billion profit forecast before. The loss is attributed to poor sales of its Wii U console.

In macro news, industrial output fell 0.1% on-month in November, down from 0.1% of growth a month ago. The figure also marked the first contraction in three months.

Focus now will be on the Bank of Japan’s two-day meeting starting today. Consensus expects the central bank to keep its aggressive monetary policy steady.