AN INVESTOR'S VIEW - CROESUS:Trading statements from CRH and Anglo Irish Bank point to challenging times ahead.

IN RECENT weeks global equity markets have managed to claw back some of the losses that were incurred earlier in the year.

Last week's employment report in the US, which was better than expected, together with improved sentiment indicators, gave the equity market an added fillip.

Also, the first quarter corporate reporting season in the US has proved to be a little better than feared.

Compared with a year ago SP 500 companies are now expected to post a 15 per cent earnings decline.

Not surprisingly the main culprit in this profits fall is the financial sector. There are 92 financial companies in the SP 500 index and most of these have now reported first quarter earnings. Investment analysts estimate that the year-on-year first quarter fall in profits from the financial sector will be as large as 75 per cent.

The positive side to the first quarter reporting season is that non-financial companies have managed to increase profits by an estimated 8 per cent. This suggests that growth outside the US is maintaining sufficient momentum to offset US weakness.

The optimists are now hoping that a robust international economy, combined with America's stimulatory monetary and fiscal policies, might just be enough to stave off a US recession. There are, however, at least two uncomfortable issues that simply won't go away. The first is the oil price.

Last week there were some tentative signs that the price could retreat decisively from the $120 per barrel level.

This week, the better news from the US economy served to push the price back up and through the $120 barrier.

The second issue is the fact that wholesale money market rates have remained stubbornly above official interest rates.

This is particularly evident in the UK and Europe and indicates that the credit crunch still has a very long way to run.

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In Ireland sentiment indicators of economic activity continue to point to a weakening economy. The Purchasing Managers Index (PMI) attempts to measure whether activity is rising or declining month-on-month.

The break-even mark is 50 so that the April reading of 45.2 indicates a contraction in services activity.

This follows last week's very low readings for consumer confidence and a record low for confidence in the construction sector.

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Two of the Irish market's top 10 companies issued trading statements this week.

CRH issued an interim management update covering trading conditions over the first four months of the year, where it stated that profits were behind the same period last year. Brokers had been forecasting modest growth in profits for 2008, but these forecasts now look a little optimistic.

Management indicated that the further depreciation in the dollar, combined with weaker trends in a number of its markets, has made "its goal of achieving another year of profit and earnings growth more challenging".

Anglo Irish Bank's results deserve close inspection not just for information on the bank's own business, but for any clues regarding the underlying health of the Irish and UK property markets. Anglo reported a 15 per cent increase in earnings per share (EPS) which was in line with prior guidance.

The work-in-progress pipeline was €6.8 billion at end-March compared with €9.8 billion last September and was lower than expected.

In terms of funding Anglo is in a relatively strong position with customer deposits being 62 per cent of total funding.

Liquid assets at end-March of €28 billion were reasonable in the context of a total balance sheet of approximately €100 billion.

Anglo's core equity ratio was 5.6 per cent at end-March compared with 5.2 per cent at end-September 2007. At the post-results presentation, management stated that it expected this ratio to rise to 6 per cent by year-end and to rise to 6.5 per cent in the next financial year.

In the current environment, Anglo's ability to organically grow its capital base sets it apart from many other banks.

Operationally, Anglo demonstrated an ability to keep a tight rein on costs to the extent that the cost income ratio was driven down to 19 per cent from 22 per cent. Management reiterated its guidance for full year EPS growth of 15 per cent.

These results were well received in the market where the stock built on its recovery over the past month.

While developments in the UK and Irish property markets will continue to impact on the stock's share price performance, these latest results indicate that Anglo's management have so far weathered the property and credit storms of the past year.