Turning point as US earnings recession ends

Our round-up of the best comment and analysis from the Financial Times during the week focuses on US corporate earnings, eurozone interest rates and the future of US economic reforms.

The selection is taken from our Markets Insight and Smart Money columns, written by industry contributors and FT commentators.

The FT’s John Authers says US corporate earnings have reached a turning point — the earnings recession that started two years ago has proved to be shallow and is now over.

“Coincidentally or otherwise, the period of declining earnings overlapped with the end of QE bond purchases in the US, and saw the stock market move sideways for more than a year; strip out the political noise, and the recovery of earnings helps greatly to explain why stocks have since taken a further leg higher, rather than lapsing into the bear market.”

If the reflation trade is to last, pro-growth policy announcements must evolve into appropriate measures designed by the White House and approved by Congress, says Mohamed El-Erian, chief economic adviser to Allianz.

“The immediate emphasis on tax reform, infrastructure and deregulation needs to be followed by measures to further promote productivity (eg, labour retraining and retooling, education reform and expanded public-private partnerships).”

Huw van Steenis, global head of strategy at Schroders, argues that starting to raise eurozone interest rates from their present negative level would not only be feasible but actually beneficial, especially before ceasing to buy further amounts of government debt.

“To make an elegant exit, a gradual policy adjustment should dovetail with a more expansive fiscal policy where possible, greater investment in infrastructure and progress on diversifying the sources of capital for Europe’s companies and infrastructure projects.”

Dan McCrum, the FT’s capital markets editor, says that, while expecting stockpickers to finally decrease their fees, cheap access to the stock market may change the fundamental logic of investing in it.

“If a market comes to work more effectively and efficiently, we should expect the costs for those using it to come down. The fall in costs for investors has been celebrated, but less so for its other users, the companies that sell shares.”

The FT’s Leo Lewis shows how the vulnerability of Japanese crisps — potechi — is revealing truths about trade, tariffs and Trans-Pacific Partnership.

“The suddenly exposed vulnerability offers rare clues about how Japan may approach those markets in the future and why the government of Prime Minister Shinzo Abe appears so very keen to resurrect the collapsed Trans-Pacific Partnership trade framework, even though the Trump administration has ruled the US out of it.”