World week ahead: Eyes on Apple, US GDP

BUSINESSDESK: Investors are hoping a slew of US corporate quarterly results this week, including from Apple, will help snap the market out of the funk that hammered Wall Street on Friday.

Heading into the weekend, the Dow Jones Industrial fell 1.5%, the Standard & Poor's 500 fell 1.7% and the Nasdaq Composite shed 2.2%. Friday's sell-off was triggered in particular by earnings, sales and outlook misses from tech stars Microsoft, Google and International Business Machines.

Mitigating the bad corporate news were better-than-expected economic reports last week with positive surprises on American housing, retail sales and industrial production. This week investors will eye the score on US third-quarter growth, due on Friday.

Economists polled by Bloomberg News predict that US gross domestic product advanced at a 1.8% annual rate in the third quarter after growing at a 1.3% pace in the second quarter. This would be the first back-to-back readings below 2% since the US started climbing out of the recession in 2009.

Also due in coming days are reports on new home sales and durable goods orders.

On the earnings front all eyes are on Apple's latest quarterly results, due on Thursday. While still 51% stronger than at the start of the year, shares of the benchmark company have recently taken a beating, too, finishing 3.6% lower at $US609.84 on Friday. Apple also is expected to unveil its mini iPad tomorrow.

Apple "is certainly a bellwether, and today more than any other stock, sets the mood for investors", Lawrence Creatura, portfolio manager at Federated Investors in Rochester, New York, told Reuters.

Even with low expectations for this quarter's results, many companies have failed to meet them.

In the past six days, 38% of S&P 500 companies surpassed expectations on revenue, compared to 41% since the start of the reporting period and down from the 62% long-term average, according to Thomson Reuters data.

In terms of earnings, however, the results so far are more in line both with those modest expectations: 62% of companies that reported in the past six days beat expectations versus 60.3% since the start of the earnings period and the 62% long-term average, the data shows.

Among other companies scheduled to report this week are Caterpillar, 3M, Facebook and United Parcel Service.

In the past six days, the Standard & Poor's 500 Index eked out a 0.3% gain, while the Dow Jones Industrial Average managed a 0.1% increase.

The Federal Reserve's policy makers meet over two days from tomorrow and investors will look for any further clues on the central bank's assessment of the economy. But given that the presidential election is fast approaching, the Fed is expected to hold steady on its policy positioning.

The US Treasury is scheduled to auction $US99 billion of notes this week.

In Europe, the Stoxx 600 Index added 1.7% in the past five days. Supporting the mood was Moody's decision to maintain Spain's investment grade credit rating. That helped the nation's 10-year bond yield decline to the lowest level in more than six months on Friday.

"Moody's concluding Spain should keep its current rating has bought a lot of relief and that should provide some kind of lasting comfort to investors," Jamie Searle, a fixed- income strategist at Citigroup in London, told Bloomberg News.

Even so, a summit of European Union leaders failed to show any progress on an anticipated full-blown financial rescue request for Spain.

Meanwhile, Germany's Finance Ministry is considering whether it makes sense for Greece to buy back some of its own bonds as a way of easing its debt burden, Spiegel magazine reported at the weekend.

The Greek government could fund the move by borrowing money from the eurozone's permanent bailout fund.

A spokesman for the Finance Ministry declined to comment on the report, according to Reuters, saying Germany was waiting for a report on Greece's progress in meeting bail-out conditions by its international lenders.