US markets slipped back sharply after Fed Chairman Jay Powell adopted a less dovish tone when it came to FOMC future policy expectations. Much has been made of the Fed chairs use of the word “transitory” in the context of the Fed’s view on inflation as well as rate expectations, however this is hardly surprising given recent history of listening to central bank speak.

Central bankers always describe inflation, whether it be rising or falling as “transitory”, and it was never a realistic probability that the Fed would open the door to the prospect of rate cuts when wage growth is above 3% and yesterday’s ADP payrolls report for April added another 275k new jobs. This suggests that whatever one thinks of the US labour market it is nowhere near as tight as some might suggest.

This slippage in US markets has seen European markets open slightly lower this morning with attention on a slew of earnings announcements and today’s Bank of England rate meeting.

Lloyds Banking Group latest numbers for Q1 appear to show that despite widespread uncertainty over the prospect of a “no deal” Brexit outcome that the bank has had a decent quarter. A slightly weaker UK economy doesn’t appear to have affected lending too much with £441bn in loans and advances to customers, compared of £445bn a year ago.

Net interest margin was slightly softer at 2.91%, not altogether surprising given diminishing expectations about a rise in interest rates this year, while statutory pre-tax profits rose to £1.6bn, slightly below expectations of £1.88bn but still well above the levels seen in Q4, and in line with those a year ago.

This slight miss on pre-tax profits would appear to be down to that ongoing sore that has been PPI provisions which the bank has set aside another £100m for, as well as higher impairment charges to the tune of £275m. Restructuring costs of £126m in respect of MBNA also saw profits take a knock, while underlying profits did beat expectations.

Challenger bank Metro Bank have plunged on the open after a horrible set of numbers that were released at 4:45pm last night, only 45 minutes before a scheduled analyst call.

If management were hoping to avoid greater scrutiny by giving analysts limited time to peruse the numbers then this morning’s share price action suggests that while they may have avoided some difficult questions, the numbers more or less speak for themselves. They also raise important questions over not only the quality of managements oversight policies but also the auditors themselves.

In light of recent weakness in some of the earnings of its US peers there was a concern that Royal Dutch Shell’s latest Q1 numbers might suffer from the same affliction, however this morning’s numbers put those concerns firmly to bed.  Concerns about lower natural gas prices and rising US rates don’t appear to have affected one of the FTSE100 key bellwethers profits in anyway, which is good news for pension funds.

Quarterly profits came in at $5.3bn well above estimates of $4.5bn, and only modestly down from a year ago.

Integrated gas saw revenues rise to $2.5bn, blowing away concerns of the impact of lower gas prices, while both upstream and downstream saw revenues increase significantly from the same period last year.

Operating cash flow was slightly lower from the previous quarter at $8.63bn, while net gearing is at a fairly manageable 26.5%. The company also announced the next tranche of its share buyback programme.

Whether these numbers will impact the share price is another matter. In terms of share price performance Shell has been a serial underperformer and is well down from the peaks we saw last year. If these numbers don’t prompt a nice move higher it’s difficult to know what will.

It’s  been a difficult quarter for Reckitt Benckiser shares as management mull the direction of the business in the wake of the imminent retirement of CEO Rakesh Kapoor, which was announced earlier this year.

There are two components to the business one healthcare, and the other home and hygiene products. The growth of the company in recent years has been driven by acquisition, the most recent of which was the purchase of Mead Johnson, however recent missteps have hit the company’s reputation, including a cyberattack, a safety scandal in South Korea and a temporary baby milk factory shutdown in the Netherlands due to technical issues. The company has also been caught up in recent events surrounding Indivior, which the Reckitt spun off in 2014, after the US department of Justice brought 28 charges against the UK based pharmaceutical company.

Reckitt has already set aside $400m in respect of probable provisions against possible fallout for this but it has problems of its own with respect to a possible restructuring of the business.

Overall sales for this quarter have been impacted by a flu season that hasn’t been as strong, largely down to milder winter weather as like for like sales rose 1%, missing expectations of 1.8%.

The company has kept its guidance intact and while noting the Indivior indictment the company has not provisioned further for it, while noting that any final costs may well be higher than the initial $400m Whether that’s wise or not is another matter, however to do so might give off the wrong signal to US authorities.

Concerns over the automotive sector have been front of mind for some time, as concerns over emissions rules and regulations, both future and current as well as trade concerns have clobbered the sector in recent months.

This morning’s update from Volkswagen has seen Q1 operating profits come in at €4.8bn, above expectations of €3.9bn, with management saying that they are more optimistic about the Chinese markets in the second half of this year, on the back of rising sales of its SUV range.

The Bank of England also meets later today and while no changes are expected the spectre of Brexit is likely to have to continue to hang over any future policy move. While there is speculation that the meeting might have a hawkish tilt, it is hard to imagine how the MPC can be anything other than neutral given the weak backdrop vis-a vis with respect to business investment.

The only reason to lean towards the hawkish side would be to help underpin the pound and keep a rein on inflation expectations at a time when headline CPI does appear to be ticking higher.

US markets look set to open slightly higher in the wake of last night’s sell off.

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