12 April 2016 by lberuti
Yesterday saw the earnings reporting season ‘s starting whistle for Q1 blown by AA ( Alcoa Inc ). They got things started after the closing bell, and the numbers were fairly mixed. While earnings came in above consensus, they missed on revenues. They also lowered their forecast for global demand of aluminium in 2016 – they expect it to climb 5% whereas previously their projection was a 6% increase – and they decreased their market deficit projection – they estimate a 1.1 million metric tons deficit in 2016 versus 1.2 million 3 months ago – as Chinese demand slows. That made AA one of the few names that saw their 5 year risk premium widen (+10bps at 405bps) in an otherwise constructive session. Even if it currently stands far off its February highs of 44%, it means the market assigns a 31% probability to an AA default over during the next 5 years.