Bears prowl the global stock markets

USA

Despite Cisco's stronger than expected earnings report that drove the markets sharply higher on Wednesday, major indices ended the week lower.

Investors' waning confidence on back of more negative corporate news late in the week including the downgrade of Worldcom credit ratings to junk status and U.S. Airways is close to bankruptcy put pressure on the market. In particular, Worldcom's news damaged the whole telecom sector. Conflicts in the Middle East, which boosted oil prices to their year high, exacerbated market weakness.

Looking ahead, the majority of retail companies are scheduled to report this week. Tuesday would be particularly busy as Wal-Mart and JC Penny are scheduled to report along with April retail sales figures.

Overall, retailers' earnings are expected to be ahead of last year's results because of weak 1Q results last year and the big jump in retail sales figures reported for February and March. Fundamentally, the sector continued to benefit from resilient consumer spending.


Europe

DJ Stoxx 50 index followed the roller-coaster ride in the U.S. and ended the week 0.8% lower. A dim outlook from Logica, one of the leading mobile phone software makers, clouded the market sentiment.

Analysts have started to focus on the effect of further dollar weakness to European companies with majority of their revenues derived from the U.S. because of the translation effect.

Overall, European healthcare and food retail companies are most exposed to dollar earnings, according to Bloomberg statistics, while financial, utility and telecommunication companies are less exposed to USD earnings.

Looking ahead, earnings results from major European companies should dominate the market this week. Among major earnings reports include UBS AG, Credit Suisse Group, Telefonica Movile, AXA and Allianz AG.

Japan

Back from the Golden Week holiday, the Nikkei fell 0.2% for the week. In addition to the relatively strong earnings results from Japanese companies so far, announcement of share buybacks have supported the market well.

Since April, 125 companies have announced plans to buy back over 500 million shares for a total of over 1.3 trillion Yen, or near 70% of the buyback amount in FY03/02. Among the most in value of share buybacks are NTT Docomo (500 billion Yen), Honda (100 billion) and Kao (80 billion).

Looking ahead, the peak of the earnings season comes in the next two weeks. Major earnings reports include those from Takeda Chemical, Murata Manufacturing and East Japan Railway.