Big US banks kickstart earnings season

Today’s headlines

What’s happening: Major US banks, including JP Morgan Chase, Wells Fargo and Citigroup released quarterly earnings on Friday.

What happened: JPMorgan, the biggest US lender in terms of assets, topped earnings estimates for the first quarter, sending its shares higher on Friday.

However, investors remained cautious about Wells Fargo, despite the company exceeding the first-quarter earnings views.

How were the results: The three giant US banks benefitted from higher interest rates during the recent quarter.

• JPMorgan reported quarterly earnings of $4.10 per share, up from $2.63 per share in the year-ago quarter. The figure came in higher than market estimates of $3.41 per share.
• Wells Fargo’s earnings surged to $1.23 per share, from 88 cents per share in the first quarter of last year, and higher than market expectations of $1.13 per share.
• Citigroup’s earnings fell to $2.19 per share, from $2.02 per share in the year-ago quarter, but still higher than the consensus estimates of $1.67 per share.

Why it matters: US banking giants kick-started the quarterly earnings season on Friday, with all three banks benefiting from rate hikes. The overall results boosted investor confidence, which had taken a hit after the failure of several mid-sized banks in March.

JPMorgan surprisingly reported a 2% rise in deposits. Citigroup posted upbeat earnings despite customer deposits declining by 3% to end the quarter at $1.33 trillion.

Although Wells Fargo reported healthy results, management warned of effects of a slowdown in the US economy due to the Fed’s monetary policy tightening.

Investors now await earnings from smaller regional banks, for a deep insight into the overall health of the financial sector.

How shares responded: JPMorgan’s shares surged 7.6% to settle at $138.73, while Citigroup’s stock added 4.8% to reach $49.56 on Friday. Wells Fargo’s shares fell 0.1% to close at $39.64.

What to watch: Investors now await earnings reports from other big banks, with Bank of America and Goldman Sachs scheduled to release their results on Tuesday. Morgan Stanley is due to report its quarterly results on Wednesday.

The markets today

The Canadian dollar will be in focus today ahead of some important economic reports

Context: The CAD/USD forex pair weakened on Friday, following hawkish remarks from a US Federal Reserve member.

Details: The Canadian currency had been receiving support from signs of easing inflation in the US. A decline in the inflation rate boosted speculations of the Fed putting an end to its rate hike cycle, exerting pressure on the US dollar.

However, Fed Governor Christopher Waller said on Friday that he would give his approval for another rate hike at the central bank’s upcoming meeting in May, despite the banking crisis and the US inflation rate colling off.

On the other hand, the Bank of Canada had kept its benchmark rate unchanged at 4.50% for a second meeting in April and is widely expected to continue to do so in the near term.

The CAD/USD forex pair surged to its highest level since February 15 on Thursday. However, the loonie traded lower on Friday as traders digested another batch of economic data. Although Canada’s home sales grew 1.4% in March, recording gains for the second straight month, the country’s manufacturing sales contracted by 3.6% in February higher, much higher than the preliminary estimate of 2.8% and compared to 4.5% growth in the earlier month.

A small spike in the price of crude oil, one of Canada’s major exports, limited losses for the loonie on Friday. WTI crude oil gained 36 cents to settle at $82.52 per barrel.

The CAD/USD pair slipped around 0.2% to 1.3363 on Friday. Despite this, the loonie ended the week with gains of around 1%. The S&P/TSX Composite index rose 0.08% to close at 20,579.91.

What are expectations: Traders await economic reports on wholesale sales and foreign securities purchases from Canada today. Wholesale sales in Canada are likely to decline by 1.6% in February, following 2.4% growth in the previous month.

Markets will also keep an eye on comments from central bank officials regarding rate hikes, which could impact the forex pair’s performance this week.

Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.36%, 0.50%, 0.52% and 0.58%, respectively.

The news shaping the markets

Brazil’s President Luiz Inacio Lula da Silva wrapped up his visit to China and urged the US to stop encouraging the Ukraine war. The safe-haven US dollar index rose this morning.

Ireland’s BNP Paribas Real Estate Construction PMI declined to 49.5 in March, from 49.8 in the previous month, exerting pressure on the EUR/USD forex pair.

Qatar’s annual inflation rate eased to 4.0% in March, from 4.4% in the prior month, which sent the QAR/USD pair higher in forex trading this morning.

Saudi Arabia’s trade surplus shrank to SAR 44.5 billion in February, from SAR 66.6 billion in the year-ago period, exerting pressure on the SAR/USD forex pair.

The People’s Bank of China kept its benchmark interest rate unchanged at 2.75%, sending the CNY/USD pair lower in forex trading this morning.

What else to watch today

India’s wholesale price inflation rate, Italy’s inflation rate, Turkey’s total motor vehicles production and central government budget balance, Brazil’s IBC-Br economic activity index, industrial entrepreneur confidence index and Central Bank of Brazil focus market readout, US NY Empire State Manufacturing Index, NAHB/Wells Fargo housing market index, net long-term TIC Flows, net treasury international capital flows and net purchases of US Treasury bonds and notes, China’s foreign direct investment, as well as South Africa SACCI business confidence index.