US corporate results show “troubling signs” as global economic outlook downgraded

A MarketWatch article has noted “troubling signs” in the latest US corporate earnings reports.

While about three-quarters of the 140 companies that have reported third-quarter earnings beat Wall Street’s estimates for net profit, Bespoke Investment Group noted that “just 58% of companies have beaten revenue estimates, which would be the weakest reading seen in six quarters”.

“In aggregate, companies are reporting sales that are 0.5% above estimates, which is below the five-year average,” reported John Butters, senior earnings analyst at FactSet.

Meanwhile, Reuters polls of more than 500 economists taken this month has shown that the outlook for 18 of 44 economies polled have been downgraded. The outlook for 23 were unchanged while three were marginally upgraded.

“A U.S. Federal Reserve that is raising interest rates to prevent the U.S. economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying,” wrote Janet Henry, global chief economist at HSBC.

Neil Shearing, group chief economist at Capital Economics, said that the global trade war “would inflict lasting damage to growth and cause a permanent loss of output”.

“The dominant downside risk to the global outlook remains the Trump Administration’s attempt to rebalance trade with China through tariff policy,” said Jean-François Perrault, chief economist at Scotiabank.