Les CFD sont des instruments complexes et sont accompagnés d’un risque élevé de pertes financières rapides en raison de l’effet de levier. 67 % des comptes d’investisseurs particuliers perdent des fonds en tradant des CFD avec ce fournisseur. Vous devez vous demander si vous comprenez comment fonctionnent les CFD et si vous pouvez vous permettre de courir le risque élevé de perdre votre argent.
La semaine à venir : La forte inflation britannique est-elle là pour rester ?
Beaucoup de choses à surveiller en termes de big data cette semaine. Tout d’abord, nous avons les données de l’IPC britannique. L’inflation persiste-t-elle plus longtemps que prévu ? Les PMI flash du Royaume-Uni et de l’UE arrivent également à un moment où il semble que l’activité économique commence à ralentir. C’est aussi la saison des bénéfices aux États-Unis avec les principaux acteurs technologiques qui font leur rapport.
IPC Britannique : faucons encerclant et impressions chaudes
Sur le plan des données, l’une des principales publications de la semaine concerne les derniers chiffres de l’indice des prix à la consommation au Royaume-Uni.
La publication de septembre montrait que l’inflation britannique avait largement dépassé l’objectif de 2 % de la Banque d’Angleterre en août. Les prix à la consommation ont bondi de 3,2 % au cours des douze mois précédant ce mois-là, les données officielles ont montré – la plus forte augmentation d’un mois à l’autre depuis le début des records en 2017.
Le Bureau des Statistiques Nationales a déclaré que la hausse était « probablement un changement temporaire » et a signalé que le programme gouvernemental Eat Out to Help Out (EOHO) avait peut-être contribué à cette augmentation.
« En août 2020, de nombreux prix dans les restaurants et les cafés ont été réduits en raison du programme gouvernemental Eat Out to Help Out, qui offrait aux clients de la nourriture et des boissons à moitié prix à manger ou à boire (jusqu’à une valeur de 10 £) entre le lundi et le mercredi », a déclaré l’ONS dans son communiqué.
« Parce que l’EOHO était un programme à court terme, le changement à la hausse du taux d’inflation sur 12 mois d’août 2021 sera probablement temporaire. »
La ligne officielle a été que les prix plus élevés sont transitoires – mais des voix au sein de la Banque d’Angleterre avertissent qu’il pourrait être là plus longtemps qu’on ne le pensait au départ.
Le nouvel économiste en chef de la BoE, Huw Pill, a déclaré qu’il pensait que l’inflation pourrait persister.
« À mon avis, cet équilibre des risques évolue actuellement vers de grandes inquiétudes concernant les perspectives d’inflation, car la force actuelle de l’inflation devrait se révéler plus durable que prévu », a déclaré Pill en septembre.
Pill prête sa voix au chœur belliciste qui monte régulièrement au sein du conseil de la Banque d’Angleterre. Un certain nombre de membres du MPC demandent une hausse des taux au début de l’année prochaine. En tant que tel, une autre impression élevée de l’IPC en septembre pourrait entraîner une augmentation du volume des faucons.
PMI pressé de signaler les ralentissements économiques ?
C’est aussi le moment du mois où les scores PMI flash commencent à atterrir rapidement.
Les données britanniques et européennes sont publiées cette semaine à la suite des rapports du mois dernier qui indiquent que la croissance ralentit dans ces deux grandes économies.
Commençons par le Royaume-Uni. Le composite flash IHS Markit de septembre a indiqué que la production était tombée à son plus bas niveau depuis février. Le score du Royaume-Uni s’est établi à 54,1 ce mois-là, contre 54,8 en août.
La reprise semble marquer le pas alors que nous nous dirigeons vers les mois d’hiver. Une activité économique plus faible associée à une inflation plus élevée ne crée pas les résultats les plus positifs pour l’économie britannique à l’avenir.
L’indice PMI du secteur des services est tombé à 54,6 en septembre contre 55,0 en août, son plus bas niveau depuis février, alors que la Grande-Bretagne était toujours bloquée. Le secteur manufacturier est passé de 60,3 à 56,4, ce qui est encore une fois le niveau le plus bas depuis février.
C’est la même histoire outre-Manche. La croissance européenne a été entravée par des contraintes d’approvisionnement poussant les coûts des intrants à des sommets de 20 ans dans toute l’UE le mois dernier. Les données PMI de ce mois-ci montreront-elles la même chose ?
En termes de scores, la lecture composite IHS a montré que la croissance économique était tombée à son plus bas niveau en cinq mois en septembre. L’UE a marqué 56,1 ce mois-là contre 59,0 en août.
C’était bien en deçà des prévisions du marché. Un sondage Reuters a indiqué qu’économistes et analystes pensaient que la production ralentirait, mais au taux beaucoup plus faible de 58,5.
Les compressions des lignes d’approvisionnement associées à un ralentissement général de la croissance du PIB semblent être les principaux facteurs ici. L’économie de l’UE approche de sa taille d’avant la pandémie, un ralentissement était donc toujours à prévoir, mais pas aussi radical.
Je m’attendrais à voir une impression PMI européenne plus faible vendredi lorsque les dernières données arriveront.
Les bénéfices de Wall Street continuent d’affluer – entrez dans les actions technologiques
La semaine prochaine, nous serons au cœur de la saison des résultats du troisième trimestre. De grandes banques, dont Goldman Sachs, Citigroup et JPMorgan, ont, pour nous, donné le coup d’envoi la semaine dernière. Maintenant, c’est au tour de certaines méga-capitalisations technologiques de partager leurs dernières données financières.
Netflix et Tesla sont les deux têtes d’affiche à surveiller cette semaine. Les deux ont annoncé des chiffres solides aux premier et deuxième trimestres, mais ont indiqué que les performances pourraient commencer à baisser au troisième trimestre de 2021.
Pour plus d’informations sur les entreprises qui publient des rapports et à quel moment, n’oubliez pas de consulter notre calendrier de la saison des bénéfices aux Etats-Unis.
Données économiques majeures
|Mon 18-Oct||3:00am||CNY||GDP q/y|
|3:00am||CNY||Retail Sales y/y|
|2:15pm||USD||Industrial Production m/m|
|3:30pm||CAD||BOC Business Outlook Survey|
|Tue 19-Oct||1:30am||AUD||Monetary Policy Meeting Minutes|
|Wed 20-Oct||7:00am||GBP||CPI y/y|
|1:30pm||CAD||Common CPI y/y|
|1:30pm||CAD||Median CPI y/y|
|1:30pm||CAD||Trimmed CPI y/y|
|3:30pm||USD||Crude Oil Inventories|
|Thu 21-Oct||1:30pm||USD||Philly Fed Manufacturing Index|
|Fri 22-Oct||7:00am||GBP||Retail Sales m/m|
|8:15am||EUR||French Flash Manufacturing PMI|
|8:15am||EUR||French Flash Services PMI|
|8:30am||EUR||German Flash Manufacturing PMI|
|8:30am||EUR||German Flash Services PMI|
|9:00am||EUR||Flash Manufacturing PMI|
|9:00am||EUR||Flash Services PMI|
|9:30am||GBP||Flash Manufacturing PMI|
|9:30am||GBP||Flash Services PMI|
|1:30pm||CAD||Core Retail Sales m/m|
|1:30pm||CAD||Retail Sales m/m|
|2:45pm||USD||Flash Manufacturing PMI|
|2:45pm||USD||Flash Services PMI|
|Tentative||USD||Treasury Currency Report|
Key earnings data
|Tue 19 Oct||Wed 20 Oct||Thu 21 Oct||Fri 22 Oct|
|Philip Morris International (PM)||Verizon Communications Inc (VZ)||AT&T (T)||American Express (AXP)|
|Johnson & Johnson (JNJ)||International Business Machines (IBM)||Intel Corp (INTC)||Schlumberger Ltd (SLB)|
|Procter & Gamble (PG)||Tesla Inc (TSLA)||Snap Inc A (SNAP)|
|Netflix Inc (NFLX)|
Summer heatwave for inflation
Inflation is getting hotter and hotter. UK inflation rose to 2.5% in June from 2.1% the previous month, smashing expectations and in the process likely to increase the pressure on the Bank of England to tighten monetary policy. It’s even hotter in the US, with headline CPI print hitting 5.4%, whilst the month-on-month registered its highest jump since June 2008. Core readings were particularly strong with the annual rate rising to 4.5% – a 30-year high – from 3.8% on a very aggressive month-on-month read. It’s becoming evident it may not be as transitory as the Fed thought it was going to be. It might not last forever but the Fed might just be minded to think that a taper announcement in Aug/Sep would be a prudent step. You can explain some of it away from base effects from last year, but the core month-on-month number hit +0.9% and is accelerating. A large chunk of that was down to used cars and truck prices (+10.5% mom) and this shouldn’t continue for much longer, but it nevertheless underlines fears inflation is racing away faster than the Fed wants to run at. On used cars, the semi shortage could go on for longer so that needs to be considered – second-hand cars were singled by the ONS in the UK data, too. The Fed and Bank of England will hope that the hot readings are a summer heatwave driven by parts of the economy that were essentially shut down last year – travel, eating out, etc. Indeed US month-on-month food away from home rose 0.7% – the biggest jump in 40 years. Perhaps you can go out to dinner more than once a night, Jay.
BofA’s July Global Fund Manager Survey pointed to the passing of peak growth, noting that investors are much less bullish on growth, profits and yield curve steepening, which has led them to unwind “junk>quality, small>large, value>growth trades back to Oct’20 levels”. They note that the cyclical “boom” has peaked with July growth expectations 47%, down from 91% peak in Mar 2021, while global GDP & EPS readings indicate macro momentum is at its weakest since the third quarter of 2020. They also say that fiscal optimism is fading with survey expectation for US infrastructure stimulus down to $1.4tn, from $1.9tn in Apr 21. But on inflation fund managers are not so worried – percentage of investors predicting higher inflation at 22% from 93% in April.
Anyway, enough buy-side ramblings, back to the market reaction. The CPI print sent the dollar up and stocks lower initially, but bond yields didn’t do much and both pared their respective gains/losses. Nasdaq futs dropped sharply but the composite was back at a fresh record high within an hour of the opening bell and the S&P 500 followed half an hour later. By the close however, the 10yr yield had jumped over 4 basis points to cross 1.4% and the major indices ended the day a little lower on the session. Market seems to be saying that higher inflation means earlier tapering/hiking chance of taper & hikes, but longer-run rates will be lower. This means a flatter curve and a riskier backdrop for the Fed to land this fighter jet on the aircraft carrier. European stock markets opened lower in early trade on Wednesday.
Key question: are we still in the transitory phase? Interesting note from Citi about how the data will get more interesting from here on out. « June could be the last month where CPI is overwhelmingly driven by “transitory” factors, meaning the coming months of CPI data should again give us new information on the path and underlying trend of inflation. » San Francisco Fed president Mary Daly said she expected the pop in inflation, and they should be in a good position to start tapering by the end of the year. I think with this print it’s very clear we get the Aug/Sep taper announcement. In fact I think the way the inflation readings have been the last three prints, it’s a nailed-on certainty.
Bank earnings were very good – Goldman Sachs delivered earnings of $15.02 per share vs. $10.24 expected, as revenues rose above $15bn. A surging IPO market sent investment banking revenues to $3.6bn – the second best ever after Q1 2021. JPMorgan posted EPS of $3.78, ahead of the $3.21 estimate, on revenues of $31.4bn. After setting aside vast sums for credit impairments, JPM recorded a net credit cost benefit of $2.3bn for the quarter as it was able to claw these back. CEO Jamie Dimon said: “In particular, net charge-offs, down 53%, were better than expected, reflecting the increasingly healthy condition of our customers and clients.” Trading revenues were down 30% but investment banking provided the offset.
Stocks decline further on inflation scare
Another sell everything kind of day: A hot inflation print from the US has left stock markets around the world nursing losses. CPI inflation rose to 4.2% last month, the strongest reading since 2008. The month-on-month increase in the core reading of 0.9% was the raciest since 1982. All else equal, higher inflation readings are headwinds for equity markets, underscoring the broad market trend of the last month as investors unload tech/growth/momentum. The reaction can be generalised as higher yields, high volatility and stronger dollar (not that I think the last of these will last) and risk assets beaten down, although reflation plays outstripped growth/momentum, as you would expect from a rising inflationary environment. The S&P 500 declined 2% to touch its lowest level since the start of April, with only energy holding above its head above water. Futures imply another downbeat session. Asian shares declined overnight.
As noted earlier this week, if this is a repeat of the tech bleed-out we saw in September, then a 10-15% decline from the highs could take NDX back to test the March low around 12,200, or another 5% roughly from where it closed last night. The 200-day SMA should prove a big support at 12,450 first. Tesla shares fell over 4% to move closer to the March low, with further losses indicated in pre-mkt. ARK’s Innovation ETF fell almost 4% to notch a fresh 6-month low. Bitcoin skidded about 10% lower to $46k before steadying around $50,500 after Elon Musk said Tesla is no longer accepting Bitcoin as payment, citing environmental concerns (uh, I think it’s been well understood for a long time that bitcoin mining uses a heck of a lot of energy, but how can we expect Musk to get this straight away..?)
European markets are in the red again as we see yet more indiscriminate selling hitting even some of the most obvious reflationary plays. I would characterise this less as a rotation than a capitulation with everything being offered. The FTSE 100 dropped around 2% to trade under 6900, hitting a low of 6,843, meaning it’s trading about 300pts off Monday’s post-pandemic peak at 7,164 and at its lowest ebb since the first week of April. Stairs up, elevator down. Basic resources, energy and tech are the biggest fallers, with defensives utilities, healthcare and real estate down less, but still lower. The big miners and oil majors trade about 3-4% lower in early trade with oil easing off a two-month high.
Looking ahead, inflation risks will continue to dominate the story around growth and value. US 10-year yields trade close to 1.7% in the biggest move in a couple of months, giving a lift to the USD and weighing on gold a tad, which has retreated from the 38.2% Fib level at $1,832 to around $1,815. US weekly unemployment claims will be watched closely, but not perhaps as closely as today’s 30-year bond auction. The more inflation weighs on the outlook the more pressure we see on risk assets – but for now the Fed looks to be calm and steady.
Burberry shares fell 8% to the bottom of the FTSE 100 even as it reported an acceleration in the recovery in the fiscal fourth quarter to the end of March, driven by double-digit growth in China, and reinstated the dividend. The negative reaction to the shares seems to be on the 11% decline in full-year revenues and 9% drop in adjusted profits, whilst the company also warned on higher costs impacting margin growth.
BT’s shares fell 3% as its full-year earnings before nasties came up a little light and guidance on free cash flow for 2022 was well below market expectations. A meatier target for rolling out fibre broadband means higher capital expenditure than previously anticipated. BT said it is aiming to rollout fibre to 25m households by 2026, 5m more than before. Capex will rise to almost £5bn next year, above estimates. For the year ahead, management are guiding Ebitda of £7.5bn-£7.7bn. Over the last year Ebitda declined 6% to £7.4bn, whilst reported profit fell 23% to £1,8bn. Free cash was down 27% over the year to £1.5bn, though this was at the top end of guidance.
US pre-mkt: Another wobble as US inflation surges to 13-year high
A Volcker-era inflation print: US inflation surged in April, with the year-over-year CPI reading coming in at 4.2%, the highest since Sep 2008 and easily beating the 3.6% expected. Prices rose 0.8% month-on-month, ahead of the 0.2% forecast. A 10% increase in used cars and trucks was the most eye-catching reading with sub-indices (see table below).
The gauge of core inflation made for even more interesting reading, at +0.9% mom and +3% yoy (see chart below). The mom reading was the highest since 1982 when Volcker was in full inflation-busting mode. We can look to lots of things like base effects, supply chain trouble, reopening, pent-up demand, stimulus effects etc as being behind this jump in pricing. Nevertheless, it’s happening; and this perfect storm for inflationary pressures is not about to go away immediately, even if it does, in the end, prove transitory. Yes, it’s predicted – albeit a little hotter than expected – but it’s still bound to stoke worries in the markets about inflation and rising nominal yields. Keep your eyes on the wage growth and job openings for the real inflationary pressure.
As we have noted previously, we can expect a series of hot prints this summer; the Fed has made it clear it will look past these as it thinks inflation will be transitory. We shall only really know if that is the case in a few months’ time. Until then expect gyrations as data shows strong inflation and growth, even if it’s largely predicted.
Market reaction: Nasdaq futs predictably fell, benchmark 10-year yields rose to 1.65%. 10-year TIPS breakeven inflation rate rose to 2.591%, the highest since 2013. S&P 500 futs were weaker too but pared some losses ahead of the open. NDX set to open around 13,175, a wee bit above yesterday’s lows under 13,100. Vixx spiked above 23 before settling into the mid-22s.
The FTSE 100 tumbled to day lows at 6,950 on a broad algo-like reaction to the data before rallying to 7,000 again investors woke up and remembered that higher inflation is net good for the UK market since it’s weighted to cyclicals not tech. Strong inflation readings ought to support the UK blue chip index. The dollar caught some bid initially, with DXY spiking to 90.67 on higher yields before giving them all back in short order to sit around 90.30 at pixel time.
EURUSD moved in a wide range on the release and is now trending to the upside.
Week Ahead: Acronyms a-go-go – CPI, PMI & GDP releases
A lot of economic data is released in key economies this week. Starting with the UK, CPI and retail sales figures are released, with furlough and lockdown still looming large over the economy. US GDP numbers for the first quarter are finalised but the focus will be on business sentiment showing up in a fresh batch of PMI releases from the US, UK and Eurozone amid vaccine progress that is diverging in the major economies.
Investors and FX traders will be watching UK inflation figures this week following the Bank of England decision.
Inflation is in focus in the UK right now, as the effects of rising bond yields, further government economic support via Chancellor Sunak’s “spend now, tax later” budget, and the Bank of England’s response continue to colour the economic picture.
ONS data shows the latest full-year CPI at 0.9%. Across 2021, the CPI is expected to rise to 1.5% across the year. Some estimates suggest it may even rise to 1.8% by April.
CPI inflation for the UK came in at -0.2% month–on–month in January, down on December’s 0.3%, but the figure was above the -0.4% the market was expecting.
CPI inflation rose 0.7% year-on-year in January, which is above December’s figure of 0.6% and above the consensus expectation for a reading of 0.6%. January’s upward trend was driven by rising prices of food, transport, and household goods.
UK Retail Sales
UK retail sales data is released this week. The latest industry data suggests February was a solid month for the UK’s retail sector, according analysis from KPMG.
Total sales were up 1% in February on a like-for-like basis against last year’s stats. Importantly, this was a sharp reversal of January’s retail sales, where sales contracted 1.3% against 2020’s figures.
Driving February’s growth was March’s reopening of schools across England. Spending on non-food items, like school uniforms and stationery, was up as shopper’s fell into the back-to-school trend.
Non-essential stores still remain shuttered in England and will remain so until April 12th. Online sales are benefitting greatly from lockdown, mainly because consumers have no other choice but to use digital outlets to get their non-essential items. Non-food spending accounts for 61% of February sales – up nearly double compared with 31% in February 2020.
However, overall consumer spending is down, Barclaycard reports, slipping 13.8% y-o-y in February. Lockdown restrictions on hospitality and leisure continue to weigh heavy. No doubt they’ll surge once full lockdown restrictions are removed in June, but until then the sector is going to greatly underperform.
US, UK, EU PMI
PMI data is released in major economies this week as the UK, US, and EU share index findings.
Starting with the UK, observers will be hoping the momentum started in February will continue into March. The IHS Markit/CIPS Composite PMI gave a reading of 49.6 for February, up from an eight-month low of 41.2 in January.
Some industries are performing above expectation. According to IHS Markit, UK construction was perkier than forecast in February, with the construction PMI at 53.3 from 49.2, as projects halted by Covid-19 were given the green light to continue or begin. Manufacturing continued an upward swing too, rising to 55.1 last month.
However, services remain disappointing, with the revised February figure chalked up as 49.5 – still below the 50 growth threshold. This is perhaps to be expected. Leisure and hospitality are still heavily restricted, so don’t expect any upward trends in March.
EU leaders were breathing a little easier after February’s numbers. For instance, manufacturing was up to 57.9 in February from 54.8 in January – a 3-year high – led by strong performance from The Netherlands and Germany.
However, since then the outlook for Europe has deteriorated as Covid cases in France and Germany have spiraled and Italy has entered a fresh lockdown. Survey data may not reflect the recent developments fully.
Hopping across the Atlantic, the US enjoyed a smash-hit manufacturing PMI in February, blowing the EU’s impressive numbers out the water. The US manufacturing PMI came in at 60.8 – the highest level seen for 3 years. However, that impressive figure may be cooled by issues in the supply chain.
According to manufacturers surveyed by the Institute for Supply Management (ISM), commodities and component prices are rising. The steel price is up, for instance, which massively affects pricing for the US manufacturing sector.
The final reading for US Q4 2020 GDP comes this week but all eyes are really on the updated forecasts we are getting for 2021. Last week the Federal Reserve raised its outlook for growth to 6.5% this year, up from 4.2% expected at the time of the December meeting.
The OECD and several investment banks have also upped their guidance for US growth this year. Therefore, high frequency data like the weekly unemployment claims and personal income and spending figures will be the ones to watch, particularly as the arrival of $1,400 stimulus cheques begins to be felt.
Markets, however, like to look forward, not backward. Q1 2021’s GDP figures will be very interesting for the market. On that front, the outlook is optimistic.
Back in December, Goldman upgraded its Q1 2021 GDP figure to 5%, following the passing of $900bn in stimulus. Joe Biden’s further $1.9bn stimulus package has been passed, which may influence the quarter’s GDP movement.
More recently, the Philadelphia Fed has put Q1 2021 GDP growth at 3.2%, citing a brighter outlook for labour markets, although it has also bumped its inflation expectations up to 2.5% for this quarter’s CPI release. The Atlanta Fed is even more upbeat than its cousin to the north. Its initial Nowcast puts the quarter’s GDP growth at 5.2% – in line with Goldman’s December estimate.
The point about unemployment raised by Philadelphia is pertinent here. The last Nonfarm payrolls indicated the jobs market was beginning to come off life support, surging 379,000. More people at work suggests more productivity, suggests healthy Q1 GDP growth.
Essentially, we’re looking at a healthier US economy in 2021 so far. Morgan Stanley has even gone so far as to suggest pre-pandemic GDP growth will kick in as early as the end of March. That might be a bit too ambitious, but it’s an indicator of increased confidence regarding the United States.
Major economic data
|Wed 24 Mar||7.00am||GBP||UK CPI y/y|
|8.15am||EUR||French Flash Manufacturing PMI|
|8.15am||EUR||French Flash Services PMI|
|8.30am||EUR||German Flash Manufacturing PMI|
|8.30am||EUR||German Flash Services PMI|
|9.00am||EUR||Flash Manufacturing PMI|
|9.00am||EUR||Flash Services PMI|
|9.30am||GBP||Flash Manufacturing PMI|
|9.30am||GBP||Flash Services PMI|
|1.45pm||USD||Flash Manufacturing PMI|
|1.45pm||USD||Flash Services PMI|
|2.30pm||USD||US Crude Oil Inventories|
|Thu 25 Mar||8.30am||CHF||SNB Monetary Policy Statement|
|12.30pm||USD||Final GDP q/q|
|2.30pm||USD||US Natural Gas Inventories|
|Fri 26 May||7.00am||GBP||Retail Sales m/m|
|9.00am||EUR||German ifo Business Climate|
Key earnings data
|Mon 22 Mar||Saudi Aramco||Q4 2020 Earnings|
|Tue 23 Mar||Adobe||Q1 2021 Earnings|
|Markit||Q1 2021 Earnings|
|Wed 24 Mar||Tencent Holdings||Q4 2020 Earnings|
|Geely Motors||Q4 2020 Earnings|
|Thu 25 Mar||CNOOC||Q4 2020 Earnings|
Week Ahead: US earnings season is here
All eyes on the US this week. Earning seasons kicks off in earnest with the big Wall Street investment banks posting their latest reports after a year in which trading revenues have offset bad loans – will this trend continue? Elsewhere US CPI comes into focus – is inflation on its way? US unemployment claims are back too, showing another week of job losses, and we also forecast how US retail sales could look following November/December holiday spending.
US Earnings Season
Earnings season kicks off on Wall Street with big banks being the first to announce their latest quarterly financials this week. JP Morgan, Citigroup, and Wells Fargo will be the big three breaking out their ledgers and letting the market know what happened for their Q4 2020 earnings all on January 15th.
JPMorgan Chase has already declared it is awarding dividends for the 10th consecutive year. Shares have been on a round trip over the last 12 months due to the pandemic but have recovered strongly thanks to vaccines and rising bond yields and are now nearly back to the $140 they traded at this time last year.
In Q3, JPM net income was up 4% and earnings-per-share posted 9% yearly growth at $2.92. Return on equity showed a robust 15% too alongside a solid 58% efficiency ratio, so JPMorgan might be showing it has what it takes to slog out in what’s proved to be a tough environment for banks.
Citigroup plans to restart stock repurchases in 2021 after the Fed gave the green light to big US bank stock buybacks under certain conditions in December 2020. It’s also attracting positive attention from analysts, who predict its 12-month EPS could rise solidly. It is expected to earn $4.27 per share going forward, which means investors will be watching this earnings release with high interest. Citi will also continue to pay shareholders a quarterly $0.51 dividend as usual.
Wells Fargo is probably not as jubilant as it prepares its Q4 2020 earnings. The US third-largest bank’s stock dropped 43% in 2020 amidst sales scandals, revenue challenges, changes in management, and a halt in stock buybacks. This compares with overall banking industry decline of 18.2%. Unlike the likes of JPM and Citi, Wells Fargo cannot lean on an investment banking or trading revenues to get it out of the hole created by bad loans.
US Retail Sales
US retail sales are announced this week, coming fresh from the holiday season.
The holiday period is traditionally a time where shoppers splurge big time and a boon for retailers as you’d expect. But with coronavirus weighing on sentiment, expectations were pretty low for December’s stats.
Mastercard SpendingPulse may show the picture is as rosy as jolly old St. Nick’s cheeks with 75-day holiday period sales, incorporating Thanksgiving and Christmas, beating expectations. Sales were up 3% against the 2.4% forecast and online sales were up a huge 49%.
Will this release reflect the positive outlook provided by Mastercard? Fitch is advising cool headedness. US retail has been up against the Covid pandemic, as well as associated factors like joblessness and loss of income for key buying groups. The data is released on Friday 15th so keep an eye on it.
Core CPI data is released this week, indicating if inflation is about to sweep into the US. Stimulus packages designed to relieve the economic pressures of Covid-19 may also stimulate inflation in 2021. Last week US 10-year breakevens rose above 2% for the first time in 2 years, indicating growing fears in the market that inflation will start to emerge.
The latest release, all the way back in December 2020 and detailing November’s CPI performance, show a 0.2% rise for urban consumers. That figured into a 1.2% rise overall. November’s increase was broad-based, with no single sector accounting for more than a quarter of the rise.
In our 2021 Outlook, we suggested inflation as a dog that may bark the loudest in 2021. Stimulus we’ve mentioned, but aspects like a higher oil prices may cause inflationary pressure on prices going forward. Let’s see what January’s first CPI release reveals.
US Unemployment Claims
Unemployment claims unexpectedly below 800,000 at the end of 2020, and January’s unemployment claims have continued this relatively positive trend. The pandemic has not been kind to the job market and looks like it will continue to throw some more punches at the US as the month progresses, but with claims data for week ended January 2nd adding 787,000 new claimants, the levels have held steady for past couple of weeks.
Despite a vaccination programme beginning to roll out in the US, the restrictions on travel and work in sectors like hospitality, continue to hit jobs. Until the pandemic is reined in, and people can start going out to bars, clubs and, well anywhere requiring hospitality providers, job losses may still keep piling on.
Major economic data
|Mon Jan 11th||1.30am||CNH||CPI y/y|
|2.30pm||CAD||BOC Business Outlook Survey|
|Tue Jan 12th||12.01pm||GBP||BRC Retail Sales Monitor y/y|
|Wed Jan 13th||10.00am||EUR||Industrial Production y/y|
|1.30pm||USD||Core CPI w/m|
|3.30pm||USD||US Crude Oil Inventories|
|Thu Jan 14th||7.00am||EUR||German Prelim GDP q/q|
|3.30pm||USD||US Natural Gas Storage|
|Fri Jan 15th||7.00am||GBP||GDP m/m|
|1.30pm||USD||Core Retail Sales m/m|
|1.30pm||USD||Retail Sales m/m|
Key earnings data
|Tue Jan 12||Yaskawa Electric Corp.||Q3 2020 Earnings|
|Wed Jan 13||Markit||Q4 2020 Earnings|
|Wipro Ltd.||Q3 2021 Earnings|
|Aeon||Q3 2020 Earnings|
|Shaw Communications Inc.||Q1 2021 Earnings|
|Thu Jan 14||BlackRock||Q3 2021 Earnings|
|Fast Retailing Co. Ltd.||Q1 2021 Earnings|
|First Republic Bank||Q4 2020 Earnings|
|Associated British Foods||Q1 2021 Earnings – Trading Update|
|Chr. Hansen Holding||Q1 2021 Earnings|
|Fri Jan 15||JPMorgan Chase & Co.||Q4 2020 Earnings|
|Reliance Industries Ltd.||Q3 2021 Earnings|
|Citigroup Inc.||Q4 2020 Earnings|
|Wells Fargo $ Co.||Q4 2020 Earnings|
|PNC Financial Services Group||Q4 2020 Earnings|
|HCL Technologies||Q3 2021 Earnings|
|V.F. Corp.||Q3 2021 Earnings|
Morning Note: China’s long march, Britain’s interminable May
Wall St was higher yesterday as markets look on the bright side of the US-China dispute, focusing on the 3-month reprieve for Huawei. But news that the White House may also blacklist Chinese surveillance company Hikvision has weighed on risk appetite again.
It’s not looking too great overall, and we continue to witness Washington push hard in one direction and then beat a tactical retreat to test its opponents.
The situation we’re in now is a marked deterioration from the start of May. Beijing is now talking about a ‘new long march’, and trade talks have completely broken down. From this point we need to start to consider escalation looks like – tariffs on the $300bn of remaining Chinese exports being discussed would lead to a material impact on the US economy, corporate earnings and inflation. There is a risk that the market is complacent to what may be a very long, drawn out affair, albeit having clearly taken on some of the warnings – SPX closed at 2,864, down 3-4% from the all-time highs. However, this may not yet reflect the downside risks from a full-blown trade conflict.
Sterling is on the backfoot again this morning after going through the ringer yesterday. GBPUSD is below 1.27 again, having whipsawed on the prospect of a second referendum. The government plans to bring the Brexit withdrawal bill again to parliament but it’s clear it lacks the votes to get through. Pressure on the PM is excruciating.
At send time the pair held on 1.2690, having fallen to 1.26844. Support seen around a series of Dec lows at 1.2610, which coincides with the 78% retracement of the top-to-bottom move up from the Jan YTD low to the Mar YTD high. This area could well be a strong line of support. If it goes then we are looking at a potential retreat to 1.24. The pound was also weaker against the euro, with EURGBP continuing its march to 0.88, having notched up its worst losing streak on record versus the single currency.
But are we set for a pullback? The short sterling trade seems pretty crowded and the 14-day RSI calls for the pound to bounce on both EURGBP and GBPUSD. Sense from the momentum indicators that this decline for sterling against both the euro and dollar is running out of steam – of course that could just mean a temporary pause. We are also quite heavily extended at the respective lower (GBPUSD) and upper (EURGBP) extremes of the Bollinger Bands. Nevertheless, risks still appear skewed to the downside given the complete lack of certainty on the political front. Expect heightened volatility in sterling crosses.
Mrs May needs to realise her deal is never going to get through Parliament, whatever amount of convoluted bargaining she attempts. Her gamble on offering a confirmatory referendum on her deal has clearly failed at the first hurdle.
Broad-based dollar strength is also weighing on the pound as the greenback is finding safe haven bid in the current trade climate. The dollar index has just pulled back from the 98 handle but is looking firm. EURUSD has pulled back further to 1.1150 but seems to be building some support around this region. With the massive descending wedge nearing completion – are we set for an upside breakout? We’ve talked before about it being too early to call the top of the dollar rally, but as we look into the second half of the year, that is when many think the dollar will see a retracement.
Japanese macro data overnight was soft – exports declined for a fifth straight month. We note the big drop in exports to China – down 6.3%, outpacing the overall decline of 2.4%. Core machine orders were down 0.7%, although this was weak, it was better than the 5.5% decline registered a month before.
On tap later we have the UK CPI figures – 2.2% is the consensus. However, we expect the number to be skewed by the hike in the energy price cap. Core inflation is seen at 1.9%. Whether this is the peak in inflation will depend a lot on Brexit, and whether we see wage growth pick up. The Bank of England will look through any above-target print for a while, at least until Brexit is clearer.
FOMC minutes on tap too – watch for the markets to find these a little more hawkish than they would like. One gets the sense that the Fed is not quite ready to end its hiking cycle. Again one feels the market is not correctly pricing the chance the Fed will raise rates later in the year – albeit the base case is for it to stand pat until 2020.