The Week Ahead: US inflation, bank earnings; ECB rate meeting
WRITTEN BY: Michael J. Kramer, Mott Capital Management Founder
On Friday banks including JPMorgan, Citigroup and Wells Fargo will kick off a fresh earnings season in the US. Before that, the March reading of the US consumer price index (CPI) – due out on Wednesday – will give an indication of whether inflation is easing or becoming stickier. And on Thursday the European Central Bank’s interest rate meeting is likely to give the market clues about the timeline for eurozone rate cuts, which could have implications for EUR/USD.
US CPI (March)
Wednesday 10 April
The US CPI report is expected to indicate that inflation remained well above the Federal Reserve’s 2% target in March. As of 4 April, the median forecast suggests that consumer prices rose 3.5% in the year to March, up from 3.2% in February. On a monthly basis, CPI is expected to have risen 0.4%, the same rate of inflation as in February. Meanwhile, core CPI – which excludes volatile items such as food and energy – is expected to have advanced 3.7% year-on-year, down from 3.8% in February, and 0.3% month-on-month, down from 0.4% a month earlier. CPI swaps are forecasting a cooler report compared to the median estimate, at 3.4% year-on-year and 0.3% month-on-month.
Wednesday 10 April
The US CPI report is expected to indicate that inflation remained well above the Federal Reserve’s 2% target in March. As of 4 April, the median forecast suggests that consumer prices rose 3.5% in the year to March, up from 3.2% in February. On a monthly basis, CPI is expected to have risen 0.4%, the same rate of inflation as in February. Meanwhile, core CPI – which excludes volatile items such as food and energy – is expected to have advanced 3.7% year-on-year, down from 3.8% in February, and 0.3% month-on-month, down from 0.4% a month earlier. CPI swaps are forecasting a cooler report compared to the median estimate, at 3.4% year-on-year and 0.3% month-on-month.
The key thing to watch ahead of the announcement is whether analysts lower their estimates to align with inflation swaps or whether analysts' estimates remain elevated. Swaps have proven to be accurate in predicting CPI data over the last few months. Therefore, if the data matches the CPI swaps' pricing, it is likely to fall short of analysts' expectations.
Should CPI come in cooler than analysts’ median estimates, it will likely lead to a decrease in the US 10-year Treasury yield. This would be significant, as it would mark the third time this year that the 10-year rate has failed to breach resistance at 4.35%, and could result in the Treasury yield retracting to around 4.15%.
ECB rate meeting
Thursday 11 April
The swaps market anticipates that the ECB will leave rates unchanged at this week's policy meeting. However, the market is assigning a 97% probability to a rate cut on 6 June, which means the market will be paying close attention to any comments or indications in support of that potential timeline.
Thursday 11 April
The swaps market anticipates that the ECB will leave rates unchanged at this week's policy meeting. However, the market is assigning a 97% probability to a rate cut on 6 June, which means the market will be paying close attention to any comments or indications in support of that potential timeline.
The euro has weakened against the US dollar over the past few months. It seemed that EUR/USD was finally breaking below a support level at the $1.07 mark, only to rally sharply following a weaker-than-expected ISM services report. If the ECB on Thursday comes across as non-committal on rate cuts, the euro may strengthen further against the dollar and rise back to the $1.10 level. Conversely, if the ECB comes across as dovish, the euro could finally break below the support level at $1.07.
US banks’ Q1 earnings
Friday 12 April
US banks are set to usher in a new earnings season on Friday, with JPMorgan, Citigroup and Wells Fargo all scheduled to report their first-quarter results before the start of US trading. Of these, JPMorgan – the largest US bank by total assets – is arguably the most critical. The owner of Chase Bank is expected to report earnings growth of 2% compared to the year-ago quarter, with earnings per share set to reach $4.18 on revenue of $41.5bn, a year-on-year increase of 5.6%. Investors will likely pay particular attention to net interest income, which is anticipated to rise by 12% to $23.19bn. Total trading revenue is forecast to decline by 7.75% to $7.7bn.
Friday 12 April
US banks are set to usher in a new earnings season on Friday, with JPMorgan, Citigroup and Wells Fargo all scheduled to report their first-quarter results before the start of US trading. Of these, JPMorgan – the largest US bank by total assets – is arguably the most critical. The owner of Chase Bank is expected to report earnings growth of 2% compared to the year-ago quarter, with earnings per share set to reach $4.18 on revenue of $41.5bn, a year-on-year increase of 5.6%. Investors will likely pay particular attention to net interest income, which is anticipated to rise by 12% to $23.19bn. Total trading revenue is forecast to decline by 7.75% to $7.7bn.
Guidance will undoubtedly be crucial, with analysts predicting a 6% decline in earnings for the second quarter to $4.11 per share as revenue drops by 3.9% year-on-year to $40.7bn. Furthermore, investors will be eager to ascertain if net interest income is on track to meet analysts’ forecasts of $90.5bn in 2024.
Any share price movement is likely to be limited, though. The market is anticipating a modest 2.7% shift in the stock, which aligns with the usual expectations for the stock post-earnings. This suggests that a substantial miss or beat on results or guidance would be unexpected, potentially leading to a considerable market reaction.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday
• Germany: February industrial production, imports, exports, trade balance
• Results: Bango (FY)
• Germany: February industrial production, imports, exports, trade balance
• Results: Bango (FY)
Tuesday
• Australia: April Westpac consumer confidence
• Eurozone: ECB bank lending survey
• Results: Tilray Brands (Q3), WD-40 Co. (Q2)
• Australia: April Westpac consumer confidence
• Eurozone: ECB bank lending survey
• Results: Tilray Brands (Q3), WD-40 Co. (Q2)
Wednesday
• Canada: BoC interest rate decision
• New Zealand: RBNZ interest rate decision
• US: March consumer price index (CPI), Fed minutes
• Results: Delta Air Lines (Q1), Tesco (FY)
• Canada: BoC interest rate decision
• New Zealand: RBNZ interest rate decision
• US: March consumer price index (CPI), Fed minutes
• Results: Delta Air Lines (Q1), Tesco (FY)
Thursday
• China: March CPI
• Eurozone: ECB interest rate decision
• US: March producer price index
• Results: Constellation Brands (Q4), Fastenal (Q1)
• China: March CPI
• Eurozone: ECB interest rate decision
• US: March producer price index
• Results: Constellation Brands (Q4), Fastenal (Q1)
Friday
• China: March imports, exports, trade balance
• France: March CPI
• Germany: March CPI
• UK: February gross domestic product, industrial production, trade balance
• US: April Michigan consumer sentiment index
• Results: Blackrock (Q1), Citigroup (Q1), JPMorgan Chase (Q1), State Street (Q1), Wells Fargo (Q1)
• China: March imports, exports, trade balance
• France: March CPI
• Germany: March CPI
• UK: February gross domestic product, industrial production, trade balance
• US: April Michigan consumer sentiment index
• Results: Blackrock (Q1), Citigroup (Q1), JPMorgan Chase (Q1), State Street (Q1), Wells Fargo (Q1)
Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule.
Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule.
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