Focus on market giants and a minnow

By Jeremy Gaunt, European Investment Correspondent

LONDON (BestGrowthStock) – Heavyweights, giants and a minnow battle it out for investors’ attention in the coming week, each with the potential to scramble already jittery financial markets.

The heavyweights are the so-called BRICs — Brazil, Russia, India and China — who hold a summit in Brasilia. The giants are primarily U.S. companies, whose first-quarter earnings season gets off the ground.

The minnow is economically challenged Greece, whose debt problems have not gone away and are triggering psychedelic headlines such as “Wall Street set to fall on Greece.”

Promises of emergency help from the European Union and International Monetary Fund have failed to calm markets about a possible default and banking crisis in a euro zone member.

During the past week, stocks slid, the euro fell (Read more about the trembling euro. ) and euro zone government bond yield spreads widened to record levels all as a result of Greece’s travails.

It has now brought urgent calls from investors for authorities to act rather than just promise.

“We’ll probably get lots of confusing noise in coming weeks on this front, but at the end of the day, I think we’ll get an IMF program (co-financed by the euro-zone) before the end of the month,” Erik Nielsen, chief European economist at Goldman Sachs, said in a note.

The trigger may be the continuing rise of Greek bond yields, now well over 7 percent and getting close to a level that would make it hard for Greece to afford needed borrowing.

Athens needs to refinance 8.5 billion euros of debt maturing on May 19.

An informal meeting of EU finance ministers on Thursday will be closely watched, even though it officially cannot take any decisions.

BRICS FLEX

The meeting of the world’s emerging market powerhouses in Brazil is another sign of the changing global landscape facing investors.

Representing 40 percent of the world’s population and around 20 percent of the global economy, the four BRIC countries’ decisions carry increasing weight, even if they argue that they are not seeking to replace the G8 of wealthy nations.

The meeting — theoretically about mutual trade and investment — will be closely watched primarily by currency traders given that the group has previously talked of becoming less dependent on the U.S. dollar.

It also comes as speculation grows about an imminent revaluation of the Chinese yuan. Investors are focusing on the scale of the move with forecasts for a widening of the dollar/yuan band ranging from 2 to 5 percent by the year-end.

The Brasilia summit is unlikely to be the locale for any such decision, but as with President Hu Jintao’s visit to Washington for a nuclear security conference during the week, the issue will be the elephant in the room.

Billionaire financier George Soros reckons Hu’s presence in Washington means that a deal is already in the works.

“President Hu would not be coming to the nuclear disarmament conference in Washington if immediately thereafter there would be a confrontation on the (yuan),” he told Reuters in an interview.

Yuan revaluation, meanwhile, would have a large impact on investors, not just because of a possible impact on China’s purchase of U.S. Treasuries but also because of what a stronger yuan might mean to other emerging markets.

Brown Brothers Harriman noted that exports into China from the United States, Japan and euro zone were relatively eclipsed by those of Asian countries.

“China/Hong Kong is the number one export market for Korea (30 percent), the Philippines (35 percent), Singapore (20 percent), and Taiwan (38 percent),” Win Thin, BBH senior currency strategist, calculated.

COMPANIES REPORT

On a more predictable level, the week ahead also brings investors the latest data on companies as the first-quarter earnings season kicks off, mainly for U.S. firms.

Among the big companies to report are JPMorgan Chase & Co (JPM.N: ), Bank of America (BAC.N: ), General Electric (GE.N: ), Google (GOOG.O: ) and Intel (INTC.O: ).

European firms get into the swing a week later, but Rio Tinto’s (RIO.L: ) come out on Thursday.

Thomson Reuters Proprietary Research shows analysts expecting companies in the U.S. S&P 500 index (.SPX: ) to report earnings-per-share growth in the first quarter of 36.8 percent, year-on-year.

Financials are likely to see the biggest percentage gains — 205.2 percent, according to Thomson Reuters, because of weakness a year ago as well as a recovering economy.

(For investment tweets, follow www.twitter.com/reutersJeremyG; for economic tweets, follow www.twitter.com/macroscope)

(Editing by Susan Fenton)

Focus on market giants and a minnow