What’s happening: Some of the biggest US banks kicked off the earnings season on a strong note on Wednesday.
What happened: Big banks in the US posted better-than-expected quarterly results and issued strong guidance for the year.
Shares of JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup climbed after they reported their fourth-quarter results.
How were the results: Major banks reported better-than-expected earnings for the fourth quarter on Wednesday.
Why it matters: The four major US lenders recorded their second-most profitable year in 2024, just behind Joe Biden’s first year as President.
The group’s revenues from trading and lending were driven by interest rate moves, with investment banking fees also surging 32% in the year.
Donals Trump’s win in the Presidential elections provided a boost to banks’ earnings in the fourth quarter, with the Federal Reserve becoming increasingly cautious about interest rate cuts due to expectations of inflationary pressures.
JPMorgan became the first US bank in history to exceed annual profits of $50 billion, while three of Citi’s five major divisions notched record revenues for 2024. Equity traders at Goldman Sachs also reported record revenues for 2024.
With corporate dealmaking picking up last year, Wells Fargo reported 62% growth in annual revenues from investment banking.
With significant growth in earnings, Citigroup announced plans to repurchase shares worth $20 billion in the coming years.
“The U.S. economy has been resilient. Unemployment remains relatively low, and consumer spending stayed healthy, including during the holiday season. Businesses are more optimistic about the economy, and they are encouraged by expectations for a more pro-growth agenda and improved collaboration between government and business,” JPMorgan CEO Jamie Dimon said.
How shares responded: JPMorgan’s stock rose 2% to close at $252.35 on Wednesday, while shares of Goldman Sachs climbed 6% to settle at $605.92. Citi’s stock surged 6.5% to $78.27 and shares of Wells Fargo added 6.7% to close at $75.95.
What to watch: Investors will continue monitoring upcoming financial earnings reports, with Bank of America and Morgan Stanley scheduled to release their results today. Markets will also watch statements from the Trump administration around tariffs and pro-business policies.
Context: The GBP/USD forex pair gained on Wednesday as investors reacted to the latest CPI data.
Details: UK’s annual inflation rate eased to 2.5% in December, in-line with the Bank of England’s November outlook and below market estimates of 2.6%. The annual core inflation rate also fell to 3.2% in December, from 3.5% in the previous month, reaching the lowest level since September 2024.
Services inflation fell to 4.4%, reaching the 2022 lows. With the latest reading signalling an easing of underlying inflationary pressures, traders expect the BoE to announce only one interest rate cut this year.
Weakness in the US dollar lent support to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell on Wednesday.
The GBP/USD pair gained more than 0.2% to 1.2243 on Wednesday, while the EUR/GBP forex pair fell around 0.4% to 0.8407.
What to watch: Data on retail sales will be released on Friday. Retail sales in the UK, which grew by 0.2% in November following a 0.7% decline in October, are expected to grow by 0.4% in December.
Other Markets: European indices closed higher on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 1.21%, 1.50%, 0.69% and 1.33%, respectively.
Ukraine uses missile and drones in one of the largest attacks in its war with Russia. The news sent the safe-haven US dollar index higher in forex trading this morning.
Australia’s unemployment rate rose to 4.0% in December, from 3.9% in the previous month, exerting pressure on the AUD/USD forex pair.
The Bank of Korea held its key interest rate at 3%, compared to market estimates of a cut of 25 bps. Despite this the KRW/USD pair rose in forex trading this morning.
Japan’s producer prices rose by 3.8% year-over-year in December, at the same rate as in the previous month and in-line with market estimates, lending support to the JPY/USD forex pair.
New Zealand’s annual food inflation accelerated to 1.5% in December, from 1.3% in the previous month. The latest reading being the highest since February sent the NZD/USD pair lower in forex trading this morning.
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