Wednesday, September 24, 2014
Stocks appear on track to start today’s session in the green, reversing the two-day losing trend that was driven mostly by global growth worries. Today’s news out of Germany is equally disconcerting, but the August U.S. housing numbers coming out a little later are expected to show a reassuring rebound in this key sector of the economy.
Germany’s influential business confidence survey from the Ifo Institute came in lower than expected for September, falling to its lowest level in more than a year — since April 2013 — indicating that the outlook for the Euro-zone’s largest economy is far from clear. The country’s economy contracted modestly in the second quarter and appeared to have gotten off to a good start in July, with most factory sector readings pointing in the right direction. But the forward-looking components of the September PMI and business confidence surveys raise serious doubts about Germany’s and the broader Euro-zone’s GDP growth estimates for the fourth quarter. Tensions with Russia over Ukraine and the resulting sanctions appear to have been a drag on the region’s economic outlook.
Germany has the fiscal space to respond to the softening economic trend, demand for which will likely increase in the coming days if data continues to show weakness. But the bigger pressure will be on the European Central Bank (ECB), which has been working hard to jump-start activity levels to fight deflationary pressure in the region’s economy. An aggressive quantitative easing program along the lines of what the U.S. Fed implemented this side of the Atlantic would be particularly useful to the export-centric German economy as it will spur export growth through a lowered exchange value of the common currency.
In corporate news, Bed, Bath and Beyond (BBBY) will be in the spotlight after coming out with positive results after the close on Tuesday and raising guidance for the December quarter. Accenture (ACN) shares will likely remain under pressure after the technology consulting firm’s results beat estimates, but its guidance came short of expectations. Accenture’s lower guidance likely has negative read-through for other tech consulting and services vendors like IBM (IBM).
Sheraz Mian
Director of Research
Note: In order to get an email alert each time this author publishes a new article, click on the ‘Follow Author’ link at the bottom of the top-right box of links.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment