Despite challenges, largest financial institutions report strong earnings: Despite market volatility, JPMorgan Chase and Citigroup report strong earnings and revenue from institutional business. Regional banks, with their exposure to commercial real estate and small businesses, remain a focus area.
Despite the ongoing volatility in the markets and some challenges faced by certain banks, the largest financial institutions like JPMorgan Chase and Citigroup have reported strong earnings and continue to generate significant revenue from institutional business. Jamie Dimon, CEO of JPMorgan Chase, has reassured investors that the number of troubled banks can be counted on one hand, suggesting that the current situation is contained. It's important to note that regional banks, which have a significant impact on the American economy through their exposure to commercial real estate and small businesses, are a key focus area. These developments underscore the resilience of the financial sector and the importance of institutional business during times of market instability.
Regional banks face uncertainty amidst earnings reports and economic uncertainties: Regional banks face uncertainty due to potential fragilities from earnings reports and economic uncertainties, with higher interest rates offering short-term benefits but long-term risks.
The ongoing pressure on regional banks, as seen in recent earnings reports, could lead to ripple effects and potential fragilities for smaller institutions. JPMorgan's surprising increase in deposits, largely driven by credit card borrowing, highlights this trend. However, the deposits may not be long-term, causing uncertainty. Meanwhile, higher interest rates have benefited banks like Citigroup and JPMorgan through increased credit card borrowing, but the long-term outlook remains uncertain due to economic uncertainties and potential consumer spending declines. Banks are preparing for potential credit losses and delinquencies, despite record revenues. Overall, the banking sector is facing a long horizon of uncertainty, and despite upbeat earnings, banks are urging caution.
Expectations for major financial institutions during earnings season: Bank of America's net interest income and wage expenses, Schwab's profitability due to fund shifts, Goldman Sachs and Morgan Stanley's investment banking fees and fixed income trading figures, and regional banks' deposit flows and loan books are key areas of focus during earnings season.
As the earnings season continues, there are significant expectations from major financial institutions like Bank of America, Goldman Sachs, Morgan Stanley, and Schwab. For Bank of America, there is interest in understanding their net interest income given their role as a large lender in the economy, as well as their wage-related expenses. Schwab is particularly noteworthy due to investor concerns about people moving funds from deposits to money market funds, which could impact profitability. Goldman Sachs and Morgan Stanley will also be under scrutiny regarding their investment banking fees and fixed income trading figures. Regional banks like PNC, M&T, and 5th 3rd are also under observation for their deposit flows and loan books, as regional differences and credit quality deterioration could impact them differently. Pac West, a regional bank based in Los Angeles, has seen wild market fluctuations, and some banks may be facing similar pressures. However, it remains uncertain which banks Jamie Dimon may be referring to in his recent comments about potential risks.
UK Inflation Surprises Economists, Bank of England Monitors Closely: Despite economic downturns, banks have alternative means to raise funds, though at a cost. UK inflation unexpectedly rose in February, driven by clothing, footwear, and food, but is predicted to decrease in March. PM Rishi Sunak aims to halve inflation in 2023.
Despite the challenges faced by certain banks in accessing capital markets during economic downturns, they now have alternative means to raise funds, although at a cost. Meanwhile, in the UK, the Bank of England is closely monitoring inflation data, which saw a surprise increase in February, with economists expecting a drop-back in March. The February CPI increase was driven by clothing and footwear, as well as food inflation. While some of this can be attributed to base effects, economists believe the March number will show a decrease, making the February figure a temporary blip. In the UK, Prime Minister Rishi Sunak has identified halving inflation as one of his key priorities for the year.
Expected decrease in inflation due to base effects and falling energy prices: Inflation is forecasted to decrease due to base effects and falling energy prices, but core inflation and services inflation remain concerns.
Inflation, which was driven up by energy prices towards the end of last year, is expected to decrease due to base effects and falling energy prices. However, there are areas of concern, particularly in services inflation, which has been stickier than expected and is expected to remain high. Core inflation, which excludes energy and food prices, is forecasted to end the year at around 4.5%. The labor market, which has seen a particular problem with participation post-pandemic, is expected to show a steady unemployment rate but cooling wage growth in the upcoming jobs data.
MPC's New Member and Wage Growth Discrepancy: New MPC member's financial services background and concerns about tight monetary policy could lead to a more hawkish stance, but her appointment won't take effect until later in the hiking cycle, and her criticism of Brexit may need to be addressed.
Despite the headline measures suggesting a significant drop in private sector wage growth from 7% to 6.5%, the underlying wage picture is cooling down more quickly. However, this is not consistent with the tight labor market conditions and inflation expectations. The Bank of England is expected to focus on this discrepancy in the upcoming jobs release. A new member, Megan Green, is joining the Monetary Policy Committee (MPC) and her financial services background and concerns about the impact of tightening monetary policy on the banking system could tilt the committee towards a more hawkish stance. Despite this, her appointment won't take effect until two meetings time, and the hiking cycle could be over by then. Another point of interest is her open criticism of Brexit on Twitter, which she may need to rein in once she joins the MPC.
Congress gears up for a contentious week on debt limit and spending cuts: House Speaker Kevin McCarthy bridges the gap between Wall Street and DC, Republicans release a detailed debt limit proposal, and both sides aim to find common ground to avoid a potential debt crisis. The podcast 'The Visibility Gap' emphasizes empathy and awareness in creating healthier workplaces.
Capitol Hill is gearing up for a contentious week as Congress returns from recess, with key lawmakers like House Speaker Kevin McCarthy making statements on the debt limit and potential spending cuts. McCarthy's speech at the New York Stock Exchange on Monday is an attempt to bridge the communication gap between Wall Street and DC, as Republicans plan to release a more detailed debt limit proposal packed with conservative priorities. The ball is then in the White House's court to begin negotiations, but both sides are eager to find common ground and avoid a potential debt crisis. Additionally, the podcast "The Visibility Gap" presented by Cigna Health Care highlights the importance of empathy and awareness in understanding the challenges faced by colleagues and making workplaces and companies healthier.
Republicans Focus on DA Bragg in Trump Indictment Process: Republicans are using district attorney Alvin Bragg's policies as a focus in the Trump indictment process, holding field hearings and campaigning in key states.
The Republican strategy regarding the ongoing Trump indictment process involves focusing on the district attorney Alvin Bragg and his policies, rather than the former president's actions. This strategy is being executed through field hearings, such as the one being held by the House Judiciary Committee in Manhattan. Additionally, Republicans are utilizing these events as a way to engage with voters and campaign in key states, like New York, where they hold significant representation. While the Senate Judiciary Committee is also investigating Supreme Court Justice Clarence Thomas' ethics, it remains unclear if this issue will receive significant attention in the House due to other legislative priorities. Democrats may attempt to bring transparency legislation related to judges' donations back into the conversation, but it may not receive significant focus in the current political climate.
Congress to Focus on Pre-existing Agenda Items: Despite competing priorities and recent events, Congress will prioritize transgender student athletes, railroad bills, military funding, and debt limit.
Despite the numerous competing priorities and recent news events, Congress is expected to focus on issues that were already on their agenda, such as transgender student athletes, railroad bills, military funding authorization, and the debt limit. These issues are likely to take priority over more recent news events like the Clarence Thomas hearing, McCarthy's meeting with Taiwan's president, and the mass shooting in Louisville. The debt limit, although not yet a pressing issue, may become a major focus in the coming weeks, but Congress's history of waiting until the last minute to act may put unnecessary pressure on the situation.
Tesla's Price Cuts and Strong Stock Performance: Driven by Market Share Gain and China's Transition Away from Gasoline Vehicles: Tesla's aggressive strategy to expedite the demise of gasoline vehicles and gain market share, particularly in China, is driving price cuts and strong stock performance. Despite potential impact on margins and demand, policy incentives and the global shift towards electric vehicles support Tesla's position.
Tesla's price cuts and strong stock performance are likely driven by the company's aggressive strategy to expedite the demise of gasoline vehicles and gain market share, particularly in China where they face stiff competition from companies like BYD. Tesla's moves to undercut the market may spook consumers about demand and impact margins, but the policy incentives and the world's transition away from gas-powered cars are on Tesla's side. At their Investor Day in March, Tesla announced a focus on reducing costs across their supply chain, and their average transaction price has been decreasing over the years. Despite being outsold by BYD in China, Tesla's aspirational brand allure and the global shift towards electric vehicles may continue to drive demand. The upcoming earnings report will provide insight into the financial impact of these strategies and the challenges and opportunities in the Chinese market.
Tesla deepens commitment to China with new facility and executive appointment: Tesla is expanding its business in China by building a new facility and appointing a top executive, signifying its dedication to the market's potential amidst political pressure from the US and Biden administration's push towards EV adoption.
Tesla is deepening its commitment to China despite political pressure from the US. The electric car maker recently announced plans to build a mega pack facility in Shanghai and appointed Tom Zhu, who led operations in China, as an executive officer. This move signifies Tesla's dedication to expanding its business in the world's most populous country. Additionally, the Biden administration's push towards EV adoption in the US benefits Tesla as a pure-play EV maker. The political climate in both countries could impact Tesla's earnings, and investors will be closely watching these developments. China has always been a significant part of Tesla's business model, and its continued investment in the region underscores its confidence in the market's potential.
Bloomberg Daybreak Weekend: Banks, Congress, Tesla, UK
Recent Episodes from Bloomberg Daybreak: Europe Edition
UPDATE: UK Debt At 100% of GDP, Inheritance Tax Fears & BOJ Holds Rates
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Asian stocks extended a rally in global equities as jobs data backed the view that the US economy is headed for a soft landing. The yen gained as the Bank of Japan left interest rates unchanged.
(2) The Bank of England has given Chancellor of the Exchequer Rachel Reeves a £4 billion ($5.3 billion) lifeline to help ease spending pressures ahead of what she has said will be a tough first budget.
(3) The UK’s Labour government is considering raising wealth taxes. Small businesses and farmers fear liquidation if relief is cut.
(4) French Prime Minister Michel Barnier met with President Emmanuel Macron in Paris late on Thursday to propose a new government after two weeks of tense consultations with rival political groups.
(5) UK government borrowing came in higher than forecast in the first five months of the fiscal year, keeping Chancellor Rachel Reeves under pressure to raise taxes to balance the books in her budget next month.
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BOJ Holds Rates, Inheritance Tax Warning & Understanding Kamala Harris
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Asian stocks extended a rally in global equities as jobs data backed the view that the US economy is headed for a soft landing. The yen gained as the Bank of Japan left interest rates unchanged.
(2) The Bank of England has given Chancellor of the Exchequer Rachel Reeves a £4 billion ($5.3 billion) lifeline to help ease spending pressures ahead of what she has said will be a tough first budget.
(3) The UK’s Labour government is considering raising wealth taxes. Small businesses and farmers fear liquidation if relief is cut.
(4) French Prime Minister Michel Barnier met with President Emmanuel Macron in Paris late on Thursday to propose a new government after two weeks of tense consultations with rival political groups.
(5) The German government has started an internal probe into its Commerzbank AG share sale after the transaction allowed UniCredit to swoop in and take a major stake in the lender.
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The Fed's Big Cut, More Devices Explode & Global Shadow Fleet Exclusive
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Federal Reserve Chair Jerome Powell led his colleagues to an outsize interest-rate cut designed to preserve the strength of the US economy as risks to the labor market mount, marking an end to their single-minded focus on quashing inflation.
(2) Traders ramped up their bets on the pace of future US interest-rate cuts after the Federal Reserve reduced its benchmark by half a point and signalled more cuts coming this year.
(3) The Bank of England is likely to decide against cutting interest rates for a second straight meeting, maintaining a patient approach to reversing the most aggressive policy tightening in decades.
(4) Israeli Defense Minister Yoav Gallant declared what he called a “new phase” in the war with regional Islamist groups and said troops would be diverted to the Lebanese border, an indication that long-held fears of a wider conflict may soon be realized.
(5) The City of London thinks the UK could attract as much as £7.7 billion ($10.2 billion) more investment by 2030 if it did a better job of attracting foreign sovereign wealth.
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Exploding Pagers Blamed On Israel, Fed Cut Record Bets Risk & Baby Hedge Funds
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On today's podcast:
(1) Iran-backed Hezbollah accused Israel of orchestrating an attack that killed several people and left almost 3,000 wounded across Lebanon, increasing fears of an all-out war.
(2) Traders who are locked into record wagers tied to the Federal Reserve’s expected interest-rate cut Wednesday are risking sharp losses if officials opt for a standard-sized reduction.
(3) BlackRock Inc. and Microsoft Corp. are teaming up on one of the largest efforts to date to bankroll the build-out of data warehouses and energy infrastructure behind the boom in artificial intelligence.
(4) Steve Cohen has stepped away from the trading floor. While the billionaire hedge fund founder remains Point72 Asset Management’s co-chief investment officer along with Harry Schwefel, he’s no longer investing clients’ capital.
(5) The German Finance Ministry is sticking to a plan to sell off its entire stake in Commerzbank despite UniCredit's move to buy all the shares offered last week, according to people familiar with the matter.
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Rate Uncertainty Highest Since 2007, Amazon Ends WFH & Norway's Currency Slide
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Not since the lead-up to the financial crisis have bond traders been so divided about the outcome of the next Federal Reserve decision.
(2) Donald Trump is poised to capitalize on the second attempt on his life in recent months, using the shocking development to try to snatch back the political momentum that Vice President Kamala Harris has enjoyed.
(3) Amazon.com Chief Executive Officer Andy Jassy is moving to streamline the world’s largest online retailer and cloud-computing company, cutting management layers and ordering employees to return to the office five days a week beginning in January.
(4) Intel Chief Executive Officer Pat Gelsinger has landed Amazon.com Inc.’s AWS as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker.
(5) Stavanger harbor bustled in the sun on a recent afternoon, the hoisting cranes, working ships and rigs under construction testament to the city’s status as Norway’s oil capital, and the main source of its wealth. Stavanger harbor bustled in the sun on a recent afternoon, the hoisting cranes, working ships and rigs under construction testament to the city’s status as Norway’s oil capital, and the main source of its wealth.
(6) Keir Starmer said he’s looking to his Italian counterpart Giorgia Meloni for lessons on tackling so-called irregular migration, as Britain’s prime minister grapples with an issue fueling a rise in Western democracies of right-wing parties that are not natural allies of his center-left Labour government.
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Second Trump Assassination Attempt Jolts Presidential Race
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On today's podcast:
(1) Former President Donald Trump is safe after his Secret Service detail opened fire at a man who was wielding an assault rifle at his West Palm Beach, Florida, golf course Sunday, in what the Federal Bureau of Investigation called an apparent assassination attempt.
(2) Back in January, Premier Li Qiang trumpeted China’s success in exceeding its 2023 growth goal without resorting to “massive stimulus.” Repeating the same feat this year now looks less likely.
(3) The Bank of England looks set to stick to its tentative interest-rate cutting when it meets this week, defying skepticism from a growing cohort of investors who see a need for more aggressive action.
(4) Italy and the UK are poised to reaffirm their pledge to defend Ukraine as Prime Minister Keir Starmer travels to Rome to seek support for a proposal to let Kyiv use non-US long-range weapons against Russia.
(5) Widespread flooding in central and eastern Europe from days of unrelenting rain is playing havoc with rail transportation and causing more evacuations of residents as well as damage to homes and infrastructure.
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Daybreak Weekend: Fed Meeting, Eurozone Data, BOJ Decision
- In the US – a preview of next week’s Fed meeting and FedEx earnings.
- In the UK – a preview of Eurozone data.
- In Asia – a look at next week’s BOJ decision and TOKEN2049 Summit .
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ECB Uncertainty, Putin NATO Threat & OpenAI Launches 'Strawberry'
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Clues on when the European Central Bank will next cut interest rates were in short supply on Thursday, with President Christine Lagarde and colleagues awaiting data on how drastically the economy is deteriorating — and how that will shift inflation.
(2) The US and UK governments are discussing allowing Ukraine to deploy British cruise missiles backed by US navigational data to conduct long-range strikes inside Russian territory, according to people familiar with the matter.
(3) The Bank of England's former Chief Economist -- Andy Haldane -- says the Chancellor's claim of a 22-billion pound 'black hole' in government finances is 'unnecessary, unhelpful' and a 'bad' idea.
(4) Republican Donald Trump ruled out appearing at another debate with Democrat Kamala Harris two days after he delivered an uneven performance at their first showdown of the election cycle.
(5) OpenAI is releasing a new artificial intelligence model known internally as “Strawberry” that can perform some human-like reasoning tasks, as it looks to stay at the top of a crowded market of rivals.
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Fed Rate Cut Bets Shrink, Trump Weighs Second Debate & The UK's Prison Problem
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) The bond market has ended its long flirtation with the Federal Reserve cutting interest rates by half a point this month as resilient inflation and labor market data reinforce a measured course of action.
(2) The European Central Bank is set to lower interest rates again, but will remain tight-lipped on the pace and extent of further action with inflation not yet fully defeated.
(3) Donald Trump said he is not inclined to have another debate with Kamala Harris after initially suggesting several additional matchups to supplement Tuesday’s forum.
(4) At least three top investment bankers from different securities firms have been detained by Chinese authorities since August, sending a chill through the industry.
(5) The early release of thousands of prisoners is a calculated move by the new government to relieve pressure on an aging system. Will it pay-off?
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Harris-Trump Fiery Debate, Yen Soars & Pensioner Benefit Cut Anger
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Democrat Kamala Harris and Republican Donald Trump sparred through their first debate on ABC News, with the former president often on the defensive over abortion rights, the January 6 insurrection and on foreign policy. This podcast includes extracts from that ABC News debate.
(2) The Bank of Japan will continue to adjust policy going forward provided the economy performs in line with its projections, BOJ Board Member Junko Nakagawa said, in comments that bumped the yen to its highest level against the dollar since January.
(3) US banks scored a big break from regulators on new capital rules — only to ruin their own celebration with downbeat outlooks on lending.
(4) Keir Starmer received a warning shot from his own Labour Party over the difficult battles ahead as he tries to fix Britain’s public finances, after his government suffered a significant display of dissent over his decision to scrap winter fuel payments for most UK pensioners.
(5) Australian real estate listing provider REA Group Ltd. presented a £5.6 billion ($7.3 billion) takeover proposal for Rightmove Plc that was rejected by the UK’s biggest property portal by market value.
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Matthew Klein on the Economic Fallout from the Russia-Ukraine War
Matthew Klein is the author of The Overshoot, a newsletter that helps readers make sense of the global economy. Matthew also closely follows Eastern Europe and Russia, has written on the economics of the Russian-Ukraine War, and is a returning guest to the podcast. Matthew rejoins David on Macro Musings to discuss this conflict and its broader economic implications. Specifically, Matthew and David discuss the historical context dating back to the Soviet Union and leading up to this conflict, how Russia’s economy has been historically linked to Ukraine’s, the consequences of Europe’s reliance on Russian fossil fuel exports, and the implications of global sanctions against Russia for dollar dominance, globalization, and inflation.
Check out Ideas of India: https://www.discoursemagazine.com/tag/ideas-of-india-podcast/, and subscribe to Ideas of India on your favorite podcast app.
Transcript for the episode can be found here.
Matthew’s Twitter: @M_C_Klein
Matthew’s Substack: https://theovershoot.co/about
Related Links:
*Trade Wars or Class Wars* by Matthew C. Klein and Michael Pettis
https://www.amazon.com/Trade-Wars-Are-Class-International/dp/0300244177
*Russia Was Already Cutting Off Europe's Gas Before Invading Ukraine. What Can Be Done?* by Matthew Klein
https://theovershoot.co/p/russia-was-already-cutting-off-europes?s=r
David’s Twitter: @DavidBeckworth
David’s blog: http://macromarketmusings.blogspot.com/