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Wall Street Slips After Lackluster Bank Earnings - EMEA Brief 16 Apr

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JoeIG

  • Wall Street ended in the negative on Monday as investors digested mixed results from the latest batch of bank earnings. Goldman Sachs reported better than expected earnings, however its shares fell 3.8% due to first quarter numbers showing net profits fell by 21% YoY. Citigroup earnings also beat expectations, although saw a 2% fall in overall revenue. 
  • The S&P 500 slipped 0.1% to 2,905.58 after having three consecutive weeks of gains. The Dow Jones ended the day down 27 points at 26,384.77.
  • Asian markets traded just below 9-month highs after bank earnings dented U.S. indices. China's CSI 300 ended down 0.3%, whilst the Nikkei added 0.2% and Australian stocks gained 0.5%. Analysts from J.P. Morgan suggests that we may have seen the best returns from Asian stocks already this year, and that share prices in the region may struggle to grow much more. 
  • In the currency market, the Australian dollar fell 0.4% to $0.7146 after minutes from a policy meeting indicated that the central bank may cut interest rates if inflation stays low. The dollar basket was steady at 96.980. 
  • Oil prices halted its recent rally on the prospect that Russia and OPEC are boosting production to contend for market share with the U.S. Brent crude was down 0.4% to $71.29 a barrel and WTI shed 0.6% to $63.53.
  • Spot gold traded slightly lower at $1,286.21 an ounce, heading for its fourth day of losses. 

Asian overnight: Asian markets looked to continue the rally despite a disappointing session in the US, where Goldman earnings and concerns over trade wars conspired to hold back equities. Overnight the RBA shifted towards a dovish tone, noting that a rate cut could become 'appropriate' if inflation failed to rise and unemployment rose. Investors will be awaiting Chinese GDP data due out on Wednesday for clues on the health of the country's economy and as an indication point for global growth.

UK, US and Europe: UK employment data will keep sterling in focus today, especially with Brexit news quiet thansk to the parliamentary recess. Other data of note include German ZEW and earnings from Netflix, Bank of America and IBM.

South Africa: US Index Futures and Asian equity markets are pointing to a positive start for the Jse Allshare Index. FOMC member Charles Evans continued the dovish (less hawkish) tone of the US federal Reserve, suggesting that rates in the world's largest economy could stay on hold until late into 2020. Commodity prices trade tentatively as trade negotiations between China and the US progress and trade talks between the US and Europe commence. The rand has given up some ground trading back above the R14/$ mark. Tencent Holdings is up 1.1% in Asia, suggestive of a positive start for major holding company Naspers. The BHP Group is down 0.4% in Australia, suggestive of a soft start for local resource counters 

Economic calendar - key events and forecast (times in GMT)

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Source: Daily FX Economic Calendar

9.30am – UK employment data: unemployment rate to rise to 4% from 3.9% for February, while the March claimant count rises by 5K from 27K in February. Average hourly earnings including bonus to rise 3.2%. Markets to watch: GBP crosses

10am – German ZEW index (April): economic sentiment index to fall to -11 from -3.6. Markets to watch: EUR crosses

Corporate News, Upgrades and Downgrades

  • Rio Tinto has downgraded its annual iron ore production forecast due to damage and disruption from tropical cyclones in western Australia.
  • Galliford Try has launched a review of its construction arm, while also issuing a profit warning following rising costs on its Queensferry Crossing joint venture. Full-year pre-tax profit will now be £30-40 million below forecasts.
  • G4S said that it had made good progress in a review to separate its cash business, while revenue rose 4.8% for Q1.
  • Ashmore saw assets under management rise 11.2% in its third quarter, to $85.3 billion. Net inflows and positive investment performance were the main drivers.

LVMH upgraded to add at AlphaValue
Rational upgraded to buy at Berenberg
TomTom upgraded to buy at Kepler Cheuvreux

Anglo American downgraded to hold at HSBC
BP downgraded to outperform at RBC
Kongsberg downgraded to hold at SEB Equities
Worldline downgraded to hold at HSBC

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