March 1, 2023
Corporate America’s Earnings Quality Is the Worst in Three Decades
In telling their stories about how the future is bright for stocks, bulls point to solid earnings to justify the optimism. But cracks are forming in that narrative — in the trajectory of profits, and just as worryingly in the makeup of the profits themselves.
In a potentially ominous development, earnings across US industries have started to expand noticeably faster than cash is coming in the door. Income at S&P 500 companies, adjusted for amortization and depreciation, topped cash flows from operations by 14% in the year through September, according to data compiled by UBS Group AG that excludes the index’s financial and energy firms.
Traders See Lower Peak BOE Rate as Bailey Says ‘Nothing Decided’
UK government bonds rallied as investors honed in on comments from Bank of England Governor Andrew Bailey that cast doubt over the pace of further interest-rate rises.
Short-end bonds led the advance, with the yield on two-year notes falling as much as 11 basis points to 3.57%. Money markets trimmed bets on the BOE’s terminal rate by some 10 basis points to imply around 77 basis points of additional hikes by the end of the year.
Chinese Stocks Rebound After Terrible Month on Upbeat Data
Chinese markets rallied as unexpectedly strong manufacturing data suggested that the economic recovery is gathering pace, emboldening traders to pile in after weeks of heavy selling.
The Hang Seng China Enterprises Index jumped 5.1% helped by tech and property stocks, rebounding after a loss of more than 11% in February. The Hang Seng Index climbed 4.2%, while the offshore yuan strengthened the most since December. Other assets across Asia also gained.
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