US Bank Earnings, Bank of England and inflation in focus

US index futures are holding steady this morning trading down only marginally as the Dow, S&P and NASDAQ consolidate yesterday’s rallies and breakouts. Earnings season continues this morning with the Main Street/Wall Street divide emerging. Market volatility during the quarter weighed down results from Bank of America and Blackrock while Delta Airlines beat the street. Bank of America also increased its loan loss provisions by 30% mainly to reflect exposure to the struggling energy sector.

One of the most fascinating markets today is crude oil where Brent and WTI are advancing 0.5%-1.0% showing really strong resilience following this week’s big jump in US inventories. It hasn’t been that long since a big build would have knocked both prices down 5% over a day or two. This indicates traders are focusing more on signs of falling US production and reports of recent comments from the IEA  suggesting the oil market surplus could fade away in the second half of 2016 as non-OPEC (read US shale) production declines. Speculation of a potential supply freeze deal this weekend may also be helping to support energy markets.

Currency markets have been active overnight and into this morning. GBP has been sliding overnight with reports UK Labour leader Jeremy Corbyn intends to join the Remain campaign not generating much enthusiasm. Sterling has started to rebound a bit following the Bank of England meeting where no change was expected. The MPC minutes were not as dovish as some had speculated with no members overtly pushing for a rate cut and the bank still thinking rates are more likely to rise over time. They did indicate that Brexit uncertainty appears to be having some impact on business activity and delaying decisions which could impact the economy over the next couple of months until the vote, but really this was to be expected in a close race.

Asia Pacific markets have also been active overnight. AUD and Australia stocks rallied on the back of a better than expected Australia jobs report, confirming the trend of improving employment growth seen in the US and Canada this month as well. NZD went the other way and fell on a drop in New Zealand manufacturing PMI while SGD took a plunge after the Monetary Authority of Singapore announced a surprise easing move.

There’s still more news to come today that could move the markets. Wells Fargo continues a big day for US bank earnings. US inflation figures could either leave the door open a crack or put the final nail in the coffin on April Fed interest rate hike speculation and may have a bigger impact than today’s Fed speakers.


Corporate News

Bank of America    $0.21 as expected. Revenues $19.5B vs street $20.3B

BlackRock        $4.25 vs street $4.30

Delta Air Lines        $1.32 vs street $1.30


Economic News

Significant announcements released overnight include:

Bank of England decision    0.50% and £375B no changes to interest rates or QE as expected

Eurozone consumer prices        0.0% vs street (0.1%)
Eurozone core CPI            1.0% as expected


Australia employment change        26K vs street 17K
Australia full-time            (9K) vs previous 16K
Australia part-time            35K vs previous (16K)
Australia unemployment rate        5.7% vs street 5.9%
Australia consumer inflation estimate    3.6% vs previous 3.4%

NZ BusinessNZ manufacturing PMI    54.7 vs previous 56.0
Singapore GDP                1.8% vs street 1.7%

Upcoming significant announcements include:

8:30 am EST        US consumer prices            street 1.1%
8:30 am EST        US core CPI                street 2.3%
8:30 am EST        US real average weekly earnings     previous 0.6%
8:30 am EST        US jobless claims            street 270K

8:30 am EST        Canada new house prices        street 1.8%
9:00 am EST        Canada Teranet/NB house prices    previous 6.5%