Market Commentary | Alcoa kicks off earnings season

Stocks were on the rise on Monday following a rally in oil prices and weak Chinese inflation figures, which increased the hope of further market-boosting stimulus. European shares opened higher after reversing early losses, helped by gains in banks and mining stocks. US stocks also surged ahead of the start of the first quarter earnings season.

Italy’s FTSE MIB was the best performing major index, enjoying a rise of 1.2%. Shares in Italian banks soared on Monday as the government prepared to meet banks and Bank of Italy executives to agree and formulate details of an investment fund. The aim of this fund is to help local lenders shed bad loans and recapitalise. Banca Monte dei Paschi di Siena was up 9.35%, and Banco Popolare Società Cooperativa enjoyed a rise of 10.61%.

In the mining industry, most mining shares were higher thanks to soft inflation data from China, making investors speculate that the Chinese authorities may act again to stimulate the world’s second largest economy. Copper and platinum producer Anglo American enjoyed a rise of 6.8% and iron ore heavyweight Rio Tinto was up 2.4%, with Glencore PLC adding 3.4%.

In other news, the owner of Britain’s Daily Mail newspaper and media group is one of several bidders for the ailing Internet company, Yahoo Inc. Yahoo shares were up 1.2% at $36.49 on news that it has extended the deadline for offers by a week. Telecom giant Verizon Communications is among the big group of companies also interested in Yahoo, as the April 18 deadline for preliminary offers looms.

Chesapeake Energy Corp. also enjoyed a great start to the week, as its shares surged 12% on Monday. This was after the company reached an amended agreement with its lenders that allows it to borrow as much as $2.5 billion, and offers relief on some terms of its debt covenants.

Shares in Direct Line and Next were among the losers on the FTSE, thanks to a broker downgrade. Food giant Nestlé also fell as its shares went ex-dividend.

Meanwhile, gold remains underpinned by global growth concerns. The precious metal headed for a third straight session gain on Monday, as investors’ risk aversion propped up market havens, such as gold and the Japanese Yen. June gold was up 1.27% to $1,259 an ounce. A weaker US dollar is proving a bullish factor for gold as the precious metal has continued its inverse relationship with the American currency. Elsewhere in the metals market, May silver jumped 3.65% to trade at $15.86 an ounce. May copper also traded in the green, as did platinum and palladium.

Alcoa was among the first companies to kick-off the first quarter earnings reporting season after the bell on Monday. While shares were up 3.42% in Monday trading, Wall Street analysts anticipated a third straight quarter of declines in both earnings and revenue, thanks to weakness is aluminium prices. And that is infact what happened. In the report, Alcoa said its first quarter earnings fell an impressive 92%, as continued weak prices in its raw aluminium segment affected company growth. Revenue decreased 15% to $4.9 billion, causing shares in Alcoa to shed 3.6% in after hours trading.

Throughout the week, various other companies are due to release their first-quarter earnings. On Wednesday, eyes will turn to J.P. Morgan Chase, and Thursday will see companies such as Bank of America, BlackRock and Wells and Fargo deliver earnings. Citigroup and Regions Financial Corporation are then due on Friday.