US banking shares mostly rise on Q3 earnings

The news shaping the markets today

Ukraine’s President Volodymyr Zelensky said that intense fighting with Russian military forces continues in the Donetsk region. The news sent the WTI crude oil prices higher this morning.

The People’s Bank of China kept its interest rate unchanged for the second straight month. The CNY/USD forex pair traded lower on the news.

Singapore’s non-oil domestic exports climbed by 3.1% year-over-year in September, following an 11.4% surge in the previous month. The latest reading also came in below the consensus estimate of 7.1%, which sent the SGD/USD pair lower in forex trading this morning.

Argentina’s monthly inflation rate slowed to 6.2% in September, from 7.0% a month ago. The figure also was better than market expectations of 6.7%. However, the forex pair traded flat on the news.

US retail trade came in unchanged for September, missing market estimates of 0.2% growth, which sent the Dow Jones index lower by more than 400 points on Friday.

What’s happening: Some of the biggest US banks kickstarted the third-quarter earnings season on Friday.

What happened: JPMorgan Chase, Wells Fargo and Citigroup reported better-than-expected earnings for the latest quarter.

However, one of the big Wall Street banks failed to meet earnings expectations, which sent its shares lower.

How were the results: All the major banks releasing results on Friday reported lower earnings for the quarter.

• JPMorgan reported adjusted earnings of $3.12 per share on revenues of $32.7 billion. Both figures topped market views of $2.88 per share and $32.1 billion, respectively.
• Citigroup’s quarterly adjusted earnings came in at $1.50 per share on revenues of $18.5 billion, higher than the consensus estimate of $1.42 per share and $18.2 billion, respectively.
• Wells Fargo reported a 31% decline in profits to $3.53 billion but the figure topped market expectations. Its quarterly revenues came in at $19.5 billion, exceeding market views of $18.7 billion.
• Morgan Stanley’s quarterly profits shrank 30% to $2.49 billion and fell short of the consensus estimate. The bank’s quarterly revenues of $12.9 billion also missed market expectations of $13.3 billion.

Why it matters: Profits at the biggest US banks declined in the third quarter amid a downturn in investment banking revenues and higher loan loss reserves.

There was a sharp decline in deal-making and IPOs in the quarter, which impacted investment banking revenues. This fell by 40% at JPMorgan and Citi and 55% at Morgan Stanley.

All four banks reported a contraction in net income, with market volatility negatively impacting investment banking activity and lenders keeping aside more funds amid the prospects of an economic slowdown.

JPMorgan kept reserves of $808 million, while Citi reported a $370 million increase in its reserves. Wells Fargo also announced a $385 million increase in the allowance for credit losses.

Against the backdrop of high inflation and recession concerns, US consumers increased their borrowings. Credit card purchases rose 18% on average at JPMorgan, Citi and Wells Fargo, with card loan balances surging 17%. Net interest income at JPMorgan and Wells Fargo also climbed by more than one-third, with Citi reporting an 18% surge in the figure.

How shares responded: Shares of Wells Fargo rose 1.9% to close at $43.17, while JPMorgan’s stock gained 1.7% to reach $111.19 on Friday. Citigroup’s shares rose 0.7%, while Morgan Stanley’s stock fell 5.1% to settle at $75.30.

What to watch: Investors will keep an eye on the US Federal Reserve, which has signalling further rate hikes ahead. Although rising interest rates generally boost bank earnings, concerns over an economic slowdown could impact their bottom line in the fourth quarter.

The markets today

The Canadian dollar will be in focus today ahead of data on new motor vehicle sales

Context: The CAD/USD forex pair declined on Friday amid lower oil prices and the release of economic data.

Details: On Friday, the safe-haven US dollar received support from high volatility in the global financial markets.

Canada released mixed economic data, which showed Canada’s manufacturing sales declining by 2.0% in August, amid a contraction in the sales of petroleum and coal products. A report released on Friday showed wholesale trade growing by 1.4% in August, hitting a record high of C$81.3 billion.

The price of crude oil, one of Canada’s major exports, came under pressure on Friday due to concerns about a decline in oil demand amid a slowdown in global economic growth.

WTI crude prices fell 3.9% to close at $85.61 per barrel on Friday. The US dollar moved higher versus a basket of major currencies. The US dollar index gained around 0.8% to reach 113.30.

On Thursday, the US reported annual inflation at 8.2% for September, higher than expectations of 8.1%, which increased prospects of further aggressive rate hikes by the Federal Reserve.

The CAD/USD forex pair fell around 0.9% to settle at 1.3880 on Friday, recording a weekly loss of about 1%

What to watch: Traders await the release of data on new motor vehicle sales from Canada today. Car registrations in Canada, which fell to 135,177 units in July, are expected to increase to 149,000 units in August. Traders will also keep an eye on crude oil prices, which will determine the direction of the loonie.

Canada’s inflation data for September, which is scheduled for release on Wednesday, will also remain in focus.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 0.12%, 0.67%, 0.90% and 0.56%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Italy’s inflation rate, Turkey’s Total motor vehicles production and central government budget balance, Central Bank of Brazil’s focus market readout, US New York Empire State manufacturing index and government budget, as well as China’s foreign direct investment.