Earnings Season Gaining Momentum  (15-10-2007)

Wall Street rallied slightly last week, with tech stocks performing strongly. Earnings season begins in earnest this week and investors will be paying attention to see not only how much companies have been affected by the credit crunch that began this summer, but also, how soon they can expect a recovery.  

The weakness in the dollar is exacerbating difficulties and financial markets would like to see G7 providing the support the ailing currency needs, especially since the Fed cut the target rate by 50 basis points last month, which caused a drop of 2.3% against a basket of 26 currencies.

 The euro zone in particular has been having an issue with this as the strength of the euro against the dollar makes its exports very expensive. According to analysts, there is little the Fed can do at this point in support of the U.S. currency, with the mortgage market in full swing. It is hoped that the move of major banks that are in talks to sent up a $80-100 billion fund for the purpose of buying mortgage securities, among other things, in an attempt to curb the effects of the credit market troubles, will give the currency some support.

 Asian markets had a mixed day with some losses as well as further record gains in both mainland China and Hong Kong, where indices are ballooning. Here banking stocks retreated due to an eighth increase in the reserve requirement, while property shares declined as investors were concerned that the central bank would continue to tighten monetary policy to control inflation

 In Tokyo, the Nikkei also gained on chipmakers offsetting losses from banks were generally lower today as Shinsei Bank plunged by 5.54%, Bank of Ryuky was down by 3.61% Mitsubishi UFJ lost 3.68% and Mizuho Financial Group shares retreated by 1.77%.

 This morning in Europe indices were mostly flat as shares seesawed in a narrow range. Gains from energy companies were offsetting losses from the tech sector, especially Philips, which lost 3.8 percent on the surprise fall in earnings at a key medical systems unit.