Earnings fill the void

Earnings filled the information void ahead of keenly awaited statements from central banks on Wednesday.

Carnival Corp was a notable underperformer after the cruise ship operator issued a profit warning overnight. The company said that booking volumes were higher thanks to lower prices for cruises, but this has resulted in lower net revenue yields.

Carnival now expects that full-year earnings per share will be between $1.45 and $1.65 a share, well down from the previous guidance of $1.80 to $2.10.

The firm's CDS spreads widened 11bps to 80bps following the announcement. This is a significant move, though it should be placed in context. Carnival's spreads were trading in excess of 170bps in the aftermath of the Costa Concordia disaster last January (the cruise ship was owned by Carnival).

Spreads have recovered since then, as have the credit standing of many companies. However, Carnival is arguably still suffering from the reputational damage wrought by the tragedy, and its second-quarter results next month will be very closely watched for signs of further profit deterioration.

Elsewhere, the earnings picture was more positive, with Vodafone posting results that were slightly better than expectations. The group's net debt/EBITDA ratio is now about 2, which is higher than last year, but broadly in line with consensus estimates.

Balance sheet metrics aside, Vodafone's spreads will continue to be driven by the probability of the company selling its stake in Verizon Wireless. Vodafone's spreads were 1bp tighter at 60bps today.

In the US, Home Depot was another firm to report expectation-beating results. The home improvement retailer also raised its sales and profit forecasts for the year, possibly a sign of confidence in the US housing recovery.

Home Depot has a very strong balance sheet - it trades with an implied rating of 'AA', despite being rated 'A' - and its spreads were unchanged today at the tight level of 30bps.

Central banks will be the main determinant of spread direction tomorrow, with announcements from Fed chairman Ben Bernanke and the Bank of Japan scheduled.

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