From strongest to weakest major currency
At the start of the North American session, the JPY is the strongest and the AUD the weakest. USD is higher despite falling yields. Divergence among central banks is a contributing factor. Tensions are also increasing in the Middle East. Israel is preparing for a possible Iranian attack, which U.S. officials say could happen imminently, possibly as early as Friday, according to a CBS News report. They report that the attack could involve more than 100 drones and numerous missiles targeting military sites in Israel. The scale of this attack would pose a significant defense challenge for Israel. Although it is possible that Iran will opt for a less severe attack to avoid further escalation, the threat of a major attack remains high. This could explain a higher dollar and lower yields.
Yesterday, yields fell after the PPI was less worrying than the previous day’s CPI. Yesterday, the Fed’s speech was perhaps a little less anxious than the markets feared, with cuts still expected (at least for the moment).
Today, the Fed’s Collins, who is an elector in 2025, expressed hope that inflationary pressures will ease later this year and predicts about two rate cuts in 2024 (up from three), although the exact timing of the start rate cuts remains uncertain. . She also mentioned the progress made in improving access to the bank discount window. Despite this rate cut outlook, Collins stressed that a rate hike is not part of the baseline expectation but has also not been completely ruled out.
The earnings calendar was launched officially/unofficially (perhaps traditionally) with some of the big financial stocks including JPMorgan Chase, Wells Fargo and Blackrock. Citicorp is due to come early this morning. Below is the summary:
JPMorgan Chase & Co (JPM)
- PES: $4.44 (expected: $4.15) – BEAT
- Income: $42.5 billion (expected: $41.85 billion) – BEAT
- Deposits: $2.43 trillion (expected: $2.4 trillion) – BEAT
- Net Interest Income (NII): $23.0 billion (expected: $23.21 billion) – MISS
- Provision for credit losses: $1.88 billion (expected: $2.78 billion) – BEAT
- Full-year NII projection: $90 billion (expected: $90.68 billion) – MISS
- Shares trade -2.11%
Wells Fargo & Co (WFC)
- PES: $1.20 (expected: $1.11) – BEAT
- Income: $20.86 billion (expected: $20.2 billion) – BEAT
- Shares trade up 0.58%
BlackRock Inc (BLK)
- Adjusted EPS: $9.81 (expected: $9.32) – BEAT
- Income: $4.73 billion (expected: $4.68 billion) – BEAT
- Assets under management (AUM): 10,470 billion dollars (expected: 10,430 billion dollars) – BEAT
- Shares trade up 2.42%
These numbers show a mostly positive earnings report for each company, with most metrics beating expectations.
Shares are weaker in premarket trading. Shares of Intel and AMD are falling following reports that China has asked telecom operators to phase out foreign chips from their networks by 2027. Gold (record highs) and silver are rising as they react to geopolitical tensions.
On the economic calendar, U.S. import and export prices will be released at 8:30 a.m. (import prices expected at 0.3% month-on-month), as well as preliminary consumer sentiment from the University of Michigan at 10:00 a.m. (expectations of 79.0 versus 79.4).
A look at other markets at the start of the North American session currently shows this. :
- Crude oil is trading up $1.26 at $86.25. Yesterday at this time the price was $85.70
- Gold is trading up $23.13 or 0.90% at $2,394.45. At this time yesterday, the price was $2,339.23.
- Silver is trading up $0.57 or 2.01% at $28.98. Yesterday at this time the price was $27.96
- Bitcoin is currently trading at $70,852. At this time yesterday, the price was trading at $70,062.
In pre-market, the main indices are trading lower:
- Dow Industrial Average futures imply a -57 point decline. Yesterday, the index was almost unchanged at $38,459.09.
- S&P futures imply a -12.06 point decline. Yesterday, the index rose 38.40 points or 0.74% to $5,199.05.
- Nasdaq futures imply a -67 point decline. Yesterday, the index rose 271.84 points or 1.68% to 16442.20
European indices are trading higher:
- German DAX, +0.84%
- CAC France, +0.76%
- British FTSE 100, +1.43%
- The Spanish Ibex was 1.08%
- Italian FTSE MIB, +1.10% % (delayed by 10 minutes)
Stocks in Asia-Pacific markets were mostly lower:
- Japanese Nikkei 225, +0.21%
- Chinese Shanghai Composite Index, -0.49%
- Hong Kong Hang Seng Index, -2.18%
- Australian S&P/ASX index, -0.33%
In the US debt market, yields have changed little:
- 2-year return 4.897%, -6.4 basis points. At this time yesterday (before CPI), the yield was at 4.975%
- 5-year yield 4.558%, -6.5 basis points at this time yesterday, the yield was at 4.620%
- 10-year yield 4.519%, -5.6 basis points. At this time yesterday, the yield was 4.568%
- 30-year yield 4.626%, -3.6 basis points at this time yesterday, the yield was at 4.655%
Looking at Treasury yield curve spreads:
- The 2-10 year gap stands at -37.7 basis points. As of this time Friday, the spread was -41.0 basis points.
- The 2-30 year gap stands at -27.1 basis points. At this time Friday, the spread was at 132.4 basis points.
The 10-year European benchmark yields are lower:
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