Apple earnings weigh on sentiment despite positive EU amp Chinese PMI data

Despite a series of strong manufacturing and service PMI’s from Europe and China, markets across Europe failed to take off due to Apples disappointing earnings which have dampened risk sentiment globally.

By mid morning the FTSE had gained 0.3% thanks to support from the mining sector but both the DAX and the CAC remained in negative territory.

In London, the miners offered support to the index as Chinese manufacturing data came in better than expected and at a 2 year high of 51.9. This provided further support to the theory that China could be finally turning a corner with their recovery having avoided a crash landing, however we will need to see more numbers like this in the coming months before China is out o the woods.

The Euro zone’s rate of decline in the private sector slowed more than expected on Thursday, supporting ECB President Draghi’s assertion that the bloc is benefiting from “positive contagion”. The Eurozone economy is taking a cautious step towards recovery but there still remains the real possibility of an economic contraction in Q1 2013. The PMI for the Eurozone service sector (the most dominant sector) rose to 48.3, the highest reading since last February, although still notably below the crunch figure of 50 which separates contraction from growth.

However the main story dominating headlines is the disappointing figures from Apple after the US closing bell yesterday. Apple shares have fallen over 10% in pre market trading after first quarter sales fell slightly short of Wall Street’s expectations and iPhone sales were also slightly lower than expected. This has fuelled fears that Apples dramatic growth could finally be easing. As Apple has a huge market capitalisation, its share price movement can have a large influence on the movement of the boarder market as it makes up 10% of the Nasdaq and 3.6% of the S&P 500, the futures for which are both trading lower. Technology stocks across Europe are also down; with ARM whose chip designs are used in most Apple products also suffered a knock on effect and, with the companys shares price trading down 1.4%.

Overall the reporting season in the US so far has actually had a positive start, with over 75% of US companies that have reported meeting or beating expectations. In Europe the figure is 80%, although reported year on year earnings have contracted by 0.8% on average.

In terms of the companies reporting here in the UK, Easyjet posted strong quarterly revenue growth sending its shares up 3.6%. The airline company reported that total revenue rose 9.1% and revenue per seat was up 8% and despite the challenging economic environment they remain optimistic regarding their position to deliver future growth.

Looking towards this afternoon investors will continue to eye up the world economics meeting in Davos and at 13:30 initial jobless claims figures are due from the US.