Political decisions are one of the main forces moving markets today. Macroeconomic data are also essential in order to determine the future of the economy. But companies continue to influence stock market volatility. A new round of corporate results are about to be published in Spain. When companies unveil Q3 results with the Ibex 35 at its highest level for the past several months, the thing to watch out for now is whether stock valuations will undermine earnings projections and cause companies to lower their forecasts.
Spain's primary stock index, the Ibex 35, has moved upward for four days in a row. Other European indexes also rose today, with the Dax posting an impressive 3% rebound. The Ibex surpassed technical resistance at 8,800 points to close at 8,892. "The bulls should set their next target at 9,200 points," said sources from Ecotrader.
Government agreements to save the banks and root out endemic financial woes in Greece are the major worries weighing down the markets, which are surging due to support from recent recapitalization efforts. Now the stock markets are facing a new fire drill that could determine whether it can consolidate gains or not.
In Spain the upcoming wave of earnings results begins today with Banesto publishing its quarterly reports. Net profits are expected to be 58 million euros, which is a 16% drop compared to the same period last year. For a full view of the Ibex 35 companies, we will have to wait until October 17 when Ferrovial publishes their data. Spain will be making sense of the numbers until mid-November.
Earnings season is critical for sustaining stock market gains, because there is a real fear of lowered predictions. ?It would not be crazy if many of our companies announce 'profit warnings' like some have already done not just in Spain, but in the rest of Europe as well,? said a source from Serfiex.
For now the consensus from investment banks (collected by FactSet) only has estimations for 21 of 35 companies on the Ibex. Experts hope that 15 of the 21 companies will improve their profit outlook with respect to the same period last year. Still, these forecasts have deteriorated a great deal in the past few weeks, and the index has plunged in turn.
Several companies should post improved earnings compared to last year: Acciona, Acerinox, Gamesa and Técnicas. All are predicted to at least double their profits.
