Current Futures: Dow -33.00, S&P -3.90, NASDAQ -4.75

European equity markets opened mixed the first trading session of the week, while Asian markets closed barely above the break-even line. U.S. futures also declined during the overnight session, but the trading volume was very low. 

The equity markets traded mixed in Europe, ahead of Bank of America and IBM’s quarterly results. Analysts estimate a $0.05 per share earnings for Bank of America but, looking at the latest trend, the bank may report higher earnings. So far, Goldman Sachs, Citigroup and Wells Fargo have reported record revenues in the first quarter. 

U.S. officials have said that banks will have to meet three criteria to repay back the Treasury loans. In order for a bank to repay its funds, it will first have to be sure the system is “stable.” Secondly, avoid any further de-leveraging that would create a systematic risk, and thirdly, the bank will need to have a strong balance sheet that would be able to expand after the loan is paid.

“This is the government’s reply to the recent comments made by Goldman Sachs and JPMorgan,” Trade Team said. “Banks will only be able to meet these conditions after the stress-tests results are revealed”, they added. “If banks are allowed to pay back the TARP loan, the financial sector index may test monthly highs.”

On the other hand, the U.K. government is building provisions for losses stemmed from the financials’ bailout. The Treasury expects the losses to be near 60 billion pounds, or 4% of the national GDP. Until now, the U.K. government is the first to admit losses from the banking bailout bill. 

“In order to recover these losses, the Treasury will have to issue even more gilts. Right now, the U.K. deficit is moving toward the 12% level, the highest on record, while some institutions, like the IMF forecast an even bigger deficit.” said. “The U.K. government will be forced to make some huge cuts in order to reduce the current account deficit, something that will further delay the recovery,” Trade Team noted. 

Overnight, the Nikkei added 17.17 points (0.19%) to 8,924.75. The Australian S&P/Asx declined 7.70 points (0.20%) to 3,769.00. The U.K. Ftse rose 11.87 points (0.29%) to 4,104.67, while the German Dax shed 22.75 points (0.49%) to 4,654.09.

Crude oil for May delivery was recently trading at $49.70 per barrel, down by $0.60.

Gold for May delivery was recently trading up by $3.20 to $871.10.