A cold blast of reality from the US
Today's company results have given the bulls a bit of a pause for thought, and that V-shaped recovery is starting to look distinctly like it might have another down-leg to come.
Today's company results have given the bulls a bit of a pause for thought. "The idea that the financial crisis is over is a fantasy and it looks like the numbers bear that out," as Harvard University professor Niall Ferguson told Bloomberg Television.
Bank of America, the biggest US lender, has just delivered a $1bn quarterly loss. That's its second quarterly loss in less than a year. And the results were worse than analysts had expected. The group got a lift from Merrill Lynch, via activity such as trading bonds, currencies and stocks. And profits at its trading arm shot up too.
But like JPMorgan Chase earlier in the week (see: Markets can't ignore the real economy for much longer), the bits of the bank entrenched in the 'real' economy felt nothing but pain. Losses on home lending and insurance more than doubled to $1.6bn, while losses on credit cards rocketed. And again, like JPMorgan, revenue from credit cards and mortgage banking was down on the previous year.
And it wasn't just Bank of America. General Electric had a tougher time too. Third-quarter profit fell by 45%. That was pretty much in line with expectations. But what spooked the market was the fact that revenues were worse than analysts expected, and orders fell too. And computer giant IBM fell back as new contract signings continued to shrink in the third quarter.
The bottom line is that profits can be protected through cost-cutting for only so long eventually business needs to pick up. And so far that doesn't look like happening any time soon. As the icing on the cake, consumer confidence also fell between September and October, again by more than analysts had expected.
That V-shaped recovery is starting to look distinctly like it might have another down-leg to come.