Market Watch:-Dow futures contract was 20 points, or 0.1%, lower, S&P 500 futures dropped 3 points, or 0.1%, while Nasdaq 100 futures traded largely unchanged.
Bank of America and Morgan Stanley report quarterly corporate earnings, while China’s growth surpasses expectations and U.K. wage growth shows stabilization.
Banks earnings
The first quarter earnings season continues with major banks like Bank of America and Morgan Stanley reporting. JPMorgan Chase, Citigroup, and Wells Fargo started disappointingly, but Goldman Sachs saw strong numbers. Evercore ISI strategists predict cautious outlooks and lower earnings estimates, with defensively positioned ratings in consumer staples, healthcare, and communication services sectors.
Chinese economy rise
The Chinese economy experienced a strong Q1 growth, with GDP rising 5.3% YoY in the first three months of 2024, above expectations of 4.8%. The government’s fiscal and monetary policy measures aim to achieve a 5% GDP growth target. However, the economy has struggled to maintain a strong post-COVID bounce, with industrial production and retail sales slowing down. The Chinese government will need to continue stimulating the economy to meet the projected year-end growth rate.
UK wage growth
The Bank of England maintained its highest interest rate since 2008, with Governor Andrew Bailey stating that Britain’s economy is nearing the point where it can start cutting interest rates. However, British core wage growth slowed in February, posting its weakest rise since September 2022. Regular wages excluding bonuses grew by 6.0%, while total pay growth remained at 5.6%. Traders expect the Bank to start cutting interest rates in August or September.
Economic Calendar
- 8:30 Housing Starts and Permits
- 9:00 Fed’s Jefferson Speech
- 9:15 Industrial Production
- 12:30 PM Fed’s Williams Speech
- 1:00 PM Fed’s Barkin Speech
- 1:15 PM Jerome Powell Speech
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MFitch Ratings has downgraded China’s credit rating outlook to “Negative” from “Stable” due to concerns over growing public debt and slowing growth in the world’s second-largest economy. The agency affirmed China’s rating at A+, citing increasing risks to China’s public finance outlook. Concerns over slowing economic growth have grown in recent months, with Fitch expecting gross domestic product growth to fall to 4.5% in 2024.
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U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.
Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.
U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.
Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.