A well-received quarterly result from Alcoa (AA) officially kicked off the second quarter earnings season. U.S. equity futures are trending higher on improved investor sentiment. There is a slew of positive headlines from the capping of the Macondo well to the successful debt offering by Greece reducing default fears as sovereign spreads narrow. While positive sentiment is manifesting itself into higher trade in the U.S. and Europe, there is still a level of concern out there regarding China's economic outlook. Other headwinds included Moody's downgrade of Portugal, a weaker German sentiment report, and higher UK inflation.Alcoa delivered the goods on multiple accounts. The aluminum giant pulled off a solid quarter including higher demand forecasts for the metal. Total revenues rose 6% sequentially on higher metal volumes. Alcoa also did its part to reassure inventors, noting improved demand in China, Russia, and Europe in the quarter.
The company raised its forecast for global aluminum consumption growth to 12% for the year, or 6.5% excluding China. This compares to its prior estimate of 10%, or 5% excluding China. The only offset was its estimate for a surplus in aluminum for the year, which is contrary to other reports.
Another headline report this morning was rail operator CSX Corp (CSX), which delivered a $0.09 upside beat. Yield growth and operating margin performance were both strong in the quarter.
The results helped to reassure investors, but the real test will come after today's close with the arrival of Intel(INTC), followed by the big banks later in the week. Also on the agenda this week is the expected Senate vote on the Financial Reform bill.
The economic calendar quickens significantly this week. First out was the May trade balance, which came in at -$42.3 bln vs. the Briefing.com consensus estimate of -$39.4 bln. While it's negative for GDP, it is a net positive for global growth. Total exports and total imports are at their highest levels since October 2008.
The June Treasury Budget will be released at 2:00 p.m. ET.
Asian stocks were mixed overnight, weighed down by China after the government made it abundantly clear it remains committed to execute tough measures to control property speculation. The China Banking Regulatory Commission reported that banks should "strictly implement" existing curbs on loans to multi-home buyers after reports surfaced last week that they were easing restrictions for third home buyers.
The concern is that what some call "draconian" measures will short-circuit the global growth engine. China has little room to maneuver. Global investors want the government to combat a potential real estate bubble that could spread into its banking sector, while at the same time orchestrate an ideal slowdown that will simultaneously curb inflation fears but not slow growth too much. There is little doubt economic growth in China has and will slow. The question is to what degree. China will releases Q2 GDP figures on Wednesday. The commodity complex is moving higher premarket. Crude oil is headed back up to the $76 per barrel level. Gold is advancing to $1210 per ounce, while copper is holding relatively flat at $300 per ounce.
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