Economic weakness weighs on US and European corporate earnings

With the third quarter of the financial year behind us, earnings season is in full swing on both sides of the Atlantic as public companies prepare to release their financial results covering the months from July to September. Investors eagerly anticipate the release of financial results from one quarter to the next as these results are used to gauge both the health of the overall economy and that of the individual companies.

Overall, while investor sentiment is somewhat subdued given the global economic backdrop and the never-ending flow of negative economic news, it is safe to say that investors are not overly optimistic on the third quarter results. However, market participants are expecting US companies to fare more favourably when compared to their European counterparts due to the perceived robustness and resilience of the American economy.

Given this scenario of expected stock market weakness, investors last week flocked to safe haven assets, as risky assets, such as the main European stock indices, traded in negative territory, while less risky assets, such as European and US government bonds, saw their yields drop further. Gold also traded in positive territory.

While the...