US bank earnings

 

Financials have been at the front of the Trump rally and this week we’ll get a much clearer idea of whether they can justify their lofty valuations.

The S&P 500 financials sector has the star performer since last November, rising nearly 25% in the last six months on the prospect of rising interest rates and looser regulation boosting earnings. Banks have been key to the stock market’s gains, particularly as they have an outsized effect on the Dow Jones industrial average.

But US earnings expectations, although high, are beginning to be revised down. At the same time there are fresh doubts about whether President Trump will succeed with his deregulation agenda.

Financials kick off the start of Q1 earnings season proper on Thursday, with Citigroup, Wells Fargo and JPMorgan Chase & Co all set to report.


UK inflation

 

Kristin Forbes was the lone hawk among the doves at the last Bank of England meeting, voting for a rate hike largely because inflation is really starting to take off. Her view to some extent was vindicated when inflation was shown to have jumped to 2.3% in February from 1.8% in January. On Tuesday we get the figures for March and they could be key to understanding just how close other members of the MPC are to raising rates when they convene again in May.

Expectations that the Bank of England might be nearer to raising rates than previously thought has kept a floor under sterling despite fears about Brexit  and a faster acceleration in inflation could see it strike a more hawkish tone. Governor Mark Carney has made it clear that tolerance for inflation overshooting is limited.

Read more about how some traders are looking to go long GBP despite the risks.

Tesco final results

 

Britain’s biggest retailer is enjoying the fruits of a turnaround but a proposed tie-up with Booker has got some investors a little nervous. But six straight periods of sales growth came to a juddering halt at the start of the year, highlighting just how tough the UK retail market is right now. A weak pound, faltering consumer spending and rising wage costs are keeping the pressure on.

We will learn a lot more about just what shape Tesco is in when it releases full-year results on Wednesday. Look for an update on the Booker deal and whether a shareholder revolt is mere bluster or something rather more substantive. 

US inflation

 

Markets should be quiet on Friday as the Easter weekend gets underway but that it’s business as usual in the US and the release of monthly inflation figures. Just as in the UK, this release will be a deciding factor in the Federal Reserve’s assessment of monetary policy at its next meeting, and therefore likely to move bond yields and the US dollar. Strengthening in prices has been key to the Fed’s hawkish pivot as it looks to raise rates three times this year. At 2.7%, CPI is running at a five-year high as reflation sets in.

Revised hours

Don’t forget that we have changes to the usual trading hours from Thursday, April 13th due to the Easter holiday.

Economic Calendar

(All times BST)

Monday, 10 April

09:00 – Italy industrial production

09:30 – Sentix investor confidence

Tuesday, 11 April

00:01 – UK BRC retail sales monitor

02:30 – Australia NAB business confidence

07:00 – Japan preliminary machine tool orders

09:30 – UK CPI, PPI, RPI and HPI inflation

10:00 – German ZEW economic sentiment

15:00 – US JOLTS jobs openings

Wednesday, 12 April

02:30 – China CPI, PPI inflation

09:30 – UK unemployment, average earnings

15:00 – Bank of Canada monetary policy and interest rate statement

15:30 – US crude oil inventories

16:15 – Bank of Canada press conference

Thursday, 13 April

Tentative – China trade balance

02:30 – Australia employment change, RBA financial stability review

08:15 – Switzerland PPI

09:30 – Bank of England credit conditions survey

13:30 – Canada manufacturing sales

13:30 – US PPI, weekly unemployment claims

15:00 – US preliminary UoM consumer sentiment

Friday, 14 April

All day – Good Friday holiday

13:30 – US CPI inflation, retail sales

Corporate Calendar


Wednesday, 12 April

Tesco (TSCO) – Y/2017, EPS estimate 0.075

Atkins WS (ATK) – trading update

Thursday, 13 April

BlackRock (BLK) – Q1/2017, EPS estimate 4.877

Citigroup (C) – Q1/2017, EPS estimate 1.260

JPMorgan Chase & Co (JPM) – Q1/2017, EPS estimate 1.527

Wells Fargo & Co (WFC) – Q1/2017, EPS estimate 0.963

Hays (HAS) – trading update

Source: Bloomberg

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