A Quiet Start despite Earning Season in Full Swing

As the Labour Day Holiday descends on the European markets, the FTSE 100 is seen making slight gains as it trades up 5 points after losing 0.7% in the previous session.

Despite a strong start to the earning season yesterday, concerns over the state of the Spanish economy as it technically enters recession, plus rising political tensions in the eurozone preventing the blue chip index from making any gains – subsequently reinforcing the resistance of 5800, which has not been tested since early April – totalled a loss for the FTSE in April of 0.5%.

With earning season in full swing today, Lloyds Banking Group reported being back in the black in the first quarter of 2012 with profits roughly in line with expectations. Lloyds reported pre-tax profits of £288 million compared to a massive loss of £3.47billion in the first quarter of last year and said it would set aside another £375 million pounds to cover compensation for people mis-sold PPI. With Lloyds mirroring wider global concerns on financials, its shares have dropped more than 40% in value over the last year; however, investors saw a welcomed rally in the stock this morning as shares traded up 2.3%.

Imperial Tobacco was also upbeat for 2012 as it set a £500 million share buyback and saw a return to sales growth; pleasing investors further with a 12.8% half year dividend increase to 31.7 pence which has resulted in demand for the stock increasing as it trades up over 2% this morning.

BP however failed to impress, reporting a bigger than expected drop in profits as the oil spill still weighs on the stock. Despite the price of crude oil increasing substantially, production for BP was down after it was forced to sell oil fields to pay for the spill. BP yesterday was trading 7% below the FTSE index and has today dropped a further 3.5%.

With earnings coming through thick and fast, investors also have to swallow a barrage of economic data, so we could be expecting a choppy few sessions for the market as we progress through the week. 

UK Manufacturing data was reported lower than expected today resulting in a slight pull back on the blue chip index. Looking forward; this after we have US manufacturing data taking the spotlight, tomorrow the unemployment rate for Germany and Thursday sees the European Central Bank Rate Decision take centre stage. 

That said, the highlight of the week for all investors will be for the latest release of US non-farm payrolls on Friday to give an indication as to the health of the economic recovery in US. After last month’s jobs disappointment, further labour weakness this time around could exacerbate fears surrounding a slowdown in the US recovery, though any impact on sentiment from labour weakness could be tempered by increased expectations of more QE from the Federal Reserve.