US equity outlook improves

USA

U.S. equity markets advanced in the past week, paced by both improving economic figures and better-than-expected quarterly earnings.

For economics, U.S. jobless claims were at 386,000 last week, the first time in 22 weeks where this measure fell below the critical 400,000 benchmark, sending a positive signal to U.S. labor market. Separately, latest readings on U.S. durable goods orders and new home sales have both surpassed economists' forecasts.

For corporate earnings, about two-thirds of the companies in the S&P 500 have reported second quarter results. It is reported that earnings have on average been 6.2% higher than forecasts, which caused many analysts to revise up their earnings estimates for the second half of 2003.

For instance, Eastman Kodak earned US$0.6/share before special charges in the second quarter, which doubled the US$0.25 - US$0.35/share guidance that was made on 18-June. Management also highlighted that the company will eliminate as many as 6,000 jobs to further curb costs. Separately, Amazon.com narrowed its quarterly loss to US$43 million from US$93.6 million in the same period last year.

Moreover, the internet retailer raised its full-year sales forecast to at least US$4.9 billion, US$200 million more than its previous estimate. Share price of Amazon.com jumped by 18% during the week on these announcements.

Management of Texas Instruments commented that its clients are buying more semiconductors used in phones with new features such as cameras and MP3 audio players. The company forecasts its sales may increase by 11% in the current quarter.

On the back of this news, a U.S. brokerage house raised the outlook on both Texas Instruments and the global semiconductor sector. Major U.S. semiconductor producers such as Texas Instruments, Applied Materials and Intel have advanced for the week.

Europe

In Britain, the economy expanded less than economists' expectations in the second quarter, where its GDP rose by 0.3% compared to a forecast of 0.4%.

Separately, British Airways agreed to meet with union leaders to avert more strikes from its ground staff and engineers. According to
management of British Airways, the air carrier had already lost 'tens of millions' of pounds after 250 check-in workers staged a walkout at London Heathrow Airport last Friday and Saturday to protest against the new electronic swipe-card system for keeping track of staff work hours and replacing random handwritten methods.

In Germany, DaimlerChrysler's second quarter net income was EUR100 million, more than three times of analysts' forecasts of EUR32 million. This solid result was driven by strong sales from its commercial vehicle division.

On the company's outlook, CEO Juergen Schrempp expects demand for passenger cars and light trucks to stabilize in the second half of 2003. Separately, Volkswagen's first half earnings beat market consensus. Management of Volkswagen expects its updated Golf vehicle to help lift the company's profit starting in the second half of this year.

Japan

Japanese semi-conductor stocks showed progress on growing optimism following news that a U.S. brokerage house had upgraded its outlook for the global semiconductor equipment industry as sales are gradually recovering.

Toshiba and NEC increased by 7.7% and 8.5%, respectively, during the past week. Sony's share price dropped by 1.8% during the past week, on the back of its weak quarterly results.

The company's quarterly earnings plunged by 98% to 1.1 billion yen, as sales for its video games and electronics slumped.