Reporting season likely to awaken snoozing market

It's quiet ... too quiet.

Google can't tell me who first used that now tired line - there are suggestions it might have been John Wayne - or at least that it dates back to the classic Western era.

It's been that kind of week. There ain't much moving in the financial world but you get the feeling there is a war party of metaphoric "injuns" about to come charging over the ridge.

There are good reasons why things are quiet now and why they aren't likely to be for long.

Both here and in the US, we are in the shadow of the reporting season. Nothing puts the markets in wait-and-see mode like the six-monthly strip-tease act that publicly listed companies are required to perform.

In the US, the season kicked off last night with aluminium giant Alcoa but it won't get into full swing until next week. Next Friday (US time) will be a big day with barometer stocks such as CitiGroup, Bank of America and GE all due to report.

In New Zealand, the season doesn't get under way until mid-August but based on the last round of results in February the next few weeks could be pretty interesting. The market tends to punish companies that surprise with bad news on results day so companies with something to declare - with regard to profit downgrades and or debt problems - will be expected to come clean sooner rather than later.

Last season saw F&P Appliances, PGG Wrightson and Nuplex all make market-rattling announcements.

Given the earnings environment was probably worse over the past six months it would be surprising if there weren't a few more companies with something to disclose.

Along the same lines, we are likely to see a second wave of equity raising and debt issues come to market over the next few months.

The market was deluged with enough offers in the first half of the year to satisfy what turned out to be a pretty healthy investor demand.

With the banks sweating about their big and increasingly precarious exposure to the dairy sector we are unlikely to see them soften up on corporate debt. Those companies that can raise money on the market will be expected to do so.

Another source of activity that will help to keep the investment bankers busy is the likelihood of more sales coming through from the private equity players.

We saw hints of that this week with Crescent Capital offloading its stake in Simply Squeezed and growing talk that Goldman Sachs JBWere's Hauraki Equity Fund No 2 will look to float at least part of Kathmandu.

Whenever journalists talk to private equity guys they are told things are fine and relations with the bankers are hunky-dory. Logic suggests that won't be the case for all of them.

More generally, things are quiet in the US, UK and Europe because they are in the middle of their silly season.

The test for businesses and for the markets tends to comes in September when normal service resumes ... or doesn't as the case may be.

Historically, September has always been one of the worst months on US markets and October is the month which saw the crashes of 1929, 1987 and (to some extent) 2008.

A quiet couple of weeks in the financial sector has probably come as a welcome breather for a world still shell-shocked by last year's meltdown.

But where we are now is not a place anyone wants to stay. A revival of activity - even if some of is set to be pretty painful - is all part of the long slow road to recovery. Like John Wayne said: "Courage is being scared to death - but saddling up anyway."