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JPMorgan shares slide on earnings miss

The news shaping the markets today

US President Joe Biden accused Russia of genocide in its invasion of Ukraine. Biden also approved $800 million in military assistance for Ukraine. Gold and silver futures climbed with increased safe-haven demand on continued geopolitical turmoil.


South Africa’s retail sales declined by 0.5% in February, versus growth of 2.3% in the prior month. However, the figure came in better than market expectations of a 0.8% decline, lending some support to the ZAR/USD forex pair.


Brazil’s retail sales grew 1.1% in February, following a 2.1% rise in January. The data surpassed market expectations of 0.1% increase and sent the BRL/USD pair slightly higher in forex trading on Wednesday.


Canada’s central bank raised its benchmark rate by 50 basis points to 1%, in-line with market expectations. This was the biggest rake hike by the Bank of Canada in two decades and supported the CAD/USD forex pair.


Australia’s seasonally adjusted unemployment rate came in at 4.0% in March, unchanged from the previous month, when the figure reached around a 13-year low. However, the data was slightly higher than the consensus estimate of 3.9%, which sent the AUD/USD pair lower in forex trading this morning.

 

What’s happening: Shares of JPMorgan Chase & Co declined on Wednesday, after the company reported lower-than-expected profits for the first quarter.

What happened: JPMorgan kickstarted the first-quarter earnings season for US banks with a disappointing print.

The biggest US bank by assets also added to its bad debt reserves, citing risks from inflation and the Russia-Ukraine crisis.

How were the results: JPMorgan reported sequential growth in revenues for the first quarter, but its earnings declined and missed market views.

  • Adjusted revenues grew to $31.59 billion, from $30.35 billion in the fourth quarter. The figure came in ahead of the consensus estimate of $31.44 billion.
  • Earnings contracted to $2.63 per share, from $3.33 per share in the prior quarter and missed the conservative consensus estimate of $2.72 per share.

Why it matters: At $8.3 billion, JPMorgan’s net income for the first quarter represented a steep 42% decline from the same period last year.

Investors became overly concerned with the bank announcing $902 million as reserves for bad loans, warning of “downside risks” due to spiking inflation in the US and the Ukraine war. This came in stark contrast to the first quarter of 2021, when JPMorgan reported robust profit growth, with the release of $5.2 billion in funds that it had set aside during the onset of the pandemic for potential defaults.

JPMorgan’s investment banking fees contracted by 31% due to a decline in equity and debt underwriting activity. This was the lowest fees since the first quarter of 2021. Investment banking revenues came in at $2.1 billion, below the Street expectation of $2.25 billion, mainly due to geopolitical tensions.

How shares responded: JPMorgan shares declined 3.18% to $127.30 on Wednesday. The stock shed more than 21% year to date.

What to Watch: Markets will closely monitor earnings releases by other banking majors, including Goldman Sachs, Wells Fargo, Citi and Morgan Stanley, which are due to report their results later today.

Investors will also keep an eye on the Russia-Ukraine situation and its impact on inflation.

 

The markets today

The US dollar will be in focus today ahead of some important economic data releases

 

Context: The US dollar climbed to a nearly 20-year high against the Japanese yen on Wednesday.

Details: The US dollar has been gaining against the yen, with expectations of aggressive rate hikes by the Federal Reserve and the continued ultra-loose monetary policy of the Bank of Japan.

BoJ Governor Haruhiko Kuroda said on Wednesday that inflation in the country was being driven by higher import costs, which could hurt the economy. Against this backdrop, Governor Kuroda stressed the need for the Bank of Japan to maintain its current monetary policy.

Meanwhile, producer prices in the US surged to 11.20% in March, representing the steepest increase since the data started being reported in November 2010. It was also higher than market expectations of 10.6%. Accelerating inflation supports market expectations of aggressive rate hikes by the Federal Reserve through this year, which lends support to the greenback.

The US dollar index, which measures the greenback’s performance against a basket of six major currencies, climbed to 100.52 during Wednesday’s session. This was the highest that the index had risen since May 2020.

The USD/JPY climbed to as high as 126.32 during Wednesday’s session, reaching the strongest level for the forex pair since June 2002.

What to watch: Traders await the release of retails sales, import and export prices, and initial jobless claims from the US. While growth in retail sales is expected to climb from 0.3% in February to 0.6% in January, initial jobless claims is estimated to increase from 166,000 in the week ending April 2 to 171,000 in the subsequent week.

Other Markets: European indices closed higher on Wednesday, with the FTSE 100, CAC 40, IBEX 35 and Stoxx 600 up by 0.05%, 0.07%, 0.46% and 0.03%, respectively. However, the DAX 30 bucked the trend, declining 0.34% on Wednesday.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0831 and 1.1066 Negative
Bitcoin – 37567 and 43986 Negative
S&P 500 – 34006 and 35018 Negative
WTI Crude – 92.93 and 105.59 Positive
DXY– 99.33 and 100.04 Positive

 

Market snapshot

What else to watch today

Saudi Arabia’s inflation rate and wholesale prices, South Africa’s mining production and gold production, Turkey’s interest rate decision and foreign exchange reserves, ECB’s interest rate decision, Eurozone’s deposit facility rate and marginal lending rate, Brazil’s current account and foreign direct investment, Canada’s manufacturing sales and wholesale sales.


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