Codzienna Analiza Rynku

It's that time again.

Earnings season is finally here with JPMorgan Chase one of the first big banks to report first-quarter results before US markets open on Wednesday. 

Shares of the America's largest bank have appreciated over 21% year-to-date, outperforming the S&P 500 which is up roughly 10%. Banks stocks in general have been supported by the increasingly optimistic outlook for the US economy, vaccine rollouts and prospects of more fiscal stimulus fuelling economic growth. Even Jamie Dimon, chief executive officer (CEO) is optimistic that the pandemic will end with a US economic rebound that could last at least two years.

Market expectations: EPS & Earnings 

Investor sentiment towards JPMorgan chase will certainly be impacted by the pending earnings report later today. According to Bloomberg, the adjusted earnings per share (EPS) estimates stand around $3.01 per share on $30.42 billion in revenues for Q1 2021. For a full year, EPS are projected at $11.25 while full-year revenues are seen hitting roughly $118.02 billion – the first potential decline in six years.

What to look out for…

There seems to be a lot of optimism around the investment bank's first-quarter results. With adjusted EPS in Q1 forecast to grow a whopping 286.38%, this will be the strongest earnings growth since 2010. Although the massive increase may be partly due to earnings recovering from their painful levels last year, such a figure is still likely to boost confidence over JPMorgan’s outlook.

Digging deeper, investors may turn their attention towards the loan loss reserves. 

Higher loan loss reserves in 2020 highlighted serious concerns about a global economic recession. In a single sentence, the loan loss reserve is the amount banks set aside to cover estimated losses on loans due to defaults. These measures hit earnings as banks set aside money to cover expected loan losses. During the final quarter of 2020, JPMorgan released credit reserves of $2.9 billion which helped boost profits. Much attention will be directed to how much it removed during the first quarter of 2021, as this will not only have an impact on its earnings number but may provide insight into how confident the investment bank is on the economic outlook.  

How about the technicals?

As highlighted earlier, shares of JPMorgan are up over 21% since the start of 2021. Since the start of February, there have been consistently higher highs and higher lows on the daily charts while the MACD trades above 0. However, it seems prices have been trapped within an $8 range over the past few weeks with support at $149.00 and resistance at $157.00.

If the first-quarter earnings meet or exceed the market expectations, this may push the bank's shares towards the $157.00 resistance level. A solid breakout above this point could open doors back towards the all-time high of $161.58 as seen on the FXTM MT4 terminal. Should $157.00 prove to be reliable resistance, a descent towards $149.00 and possibly lower could be on the cards.

Uwaga: Na treść niniejszego artykułu składają się opinie osób prywatnych i nie powinny być one odbierane jako treści zawierające porady osobiste oraz/albo inwestycyjne oraz/albo oferty oraz/albo namowę do zawierania dowolnych transakcji instrumentami finansowymi oraz/albo gwarancję oraz/albo prognozy. ForexTime (FXTM), a także partnerzy, przedstawiciele, kadra zarządzająca i pracownicy firmy nie gwarantują dokładności, ważności, precyzji czasowej czy kompletności jakichkolwiek udostępnionych tu informacji lub danych. Nie przyjmują również żadnej odpowiedzialności za ewentualne straty wynikłe z jakiejkolwiek inwestycji wykonanej na ich podstawie.

US stocks showed remarkable resilience during Tuesday’s session in the face of what could’ve been disconcerting news. The US government has ordered a pause to administering Johnson & Johnson’s Covid-19 vaccine. On a separate note, the US inflation figures came in higher than expected.

Still, the S&P 500 climbed 0.33% while the Nasdaq 100 advanced by 1.2%, with both indices boosted by the likes of Tesla, Nvidia, and Apple. The Dow Jones index however ended the latest cash session lower by 0.2%, which means we’ll have to wait a bit more before we can witness 34,000 Dow.

"Markets Extra" Podcast: What is an index and why it matters? A chat with Nasdaq

US equity futures are holding relatively steady as the next earnings season kicks off today.

The Wall Street 30 minis are trying to ease away from overbought territory, ready to relaunch higher when the next opportunity arises.

Banks first on the roll call

Financial heavyweights are first out of the earnings gates today:

• JPMorgan
• Goldman Sachs
• Wells Fargo

Note that financial stocks have been the second-best performing sector on the S&P 500 so far this year, having climbed by 18.5% year-to-date as markets pin their hopes on the US economic recovery. However, according to FactSet, less than 50% of analysts have a Buy rating on financial stocks heading into the second quarter. Perhaps some of that pessimism stems from the looming tax hikes and tougher regulations under the current US administration.

Still, for the S&P 500 as a whole, this is set to be a bumper earnings season.

Markets would want to see whether some of these estimates, as gathered by FactSet, actually prove true:

• Record high increase in EPS (earnings per share) estimates of 6%
• Highest earnings growth in over 10 years of at least 28%

Already, about 60 S&P 500 companies have issued positive guidance for EPS and sales, with that 60 tally already being a record high. Such has been the optimism leading up to the earnings announcements.

Ultimately, market participants will remain primed to the earnings outlook for the rest of the year, amid the expected economic recovery. Such corporate commentary could determine whether the S&P 500 should soar higher from current levels, even though a pullback from overbought levels appear warranted in the near future.

Vaccine woes unlikely to dampen risk appetite … for now

Markets have been willing to ignore Johnson & Johnson’s vaccine pause for the time being, nothing the shots by J&J represent only 3.6% of the near-190 million shots delivered in the US so far. Also, the pause may be lifted in a matter of days.

However, if such concerns escalate and become material enough to derail the economic recovery, that may trigger a pullback in risk assets.

For Johnson & Johnson’s stock itself, should the 100-day simple moving average (SMA) hold steady as a support level, as it did back in early March, that could help its share price bounce back when its single-shot vaccines can be administered once more. The longer the wait, perhaps the stronger the weakening bias for the stock in the interim as shareholders patience wears thin.

Uwaga: Na treść niniejszego artykułu składają się opinie osób prywatnych i nie powinny być one odbierane jako treści zawierające porady osobiste oraz/albo inwestycyjne oraz/albo oferty oraz/albo namowę do zawierania dowolnych transakcji instrumentami finansowymi oraz/albo gwarancję oraz/albo prognozy. ForexTime (FXTM), a także partnerzy, przedstawiciele, kadra zarządzająca i pracownicy firmy nie gwarantują dokładności, ważności, precyzji czasowej czy kompletności jakichkolwiek udostępnionych tu informacji lub danych. Nie przyjmują również żadnej odpowiedzialności za ewentualne straty wynikłe z jakiejkolwiek inwestycji wykonanej na ich podstawie.

It looks like it’s “rotation” Tuesday again as US stocks paint a mixed picture – Nasdaq and stay-at-home stocks are in the green while the Dow is suffering. This is all down to two news stories, the first being the US CPI data which jumped as forecast but wasn’t at the highest end of estimates. Energy costs rose over 13% y/y but at first glance, the market is fairly sanguine and appears to be looking through the figures as transitory. Many economists are not too sure and see rising prices closer to 4% in the not-too-distant future. That means the rate hike priced in at the end of 2022 is about right, but the Fed don’t agree judging by the recent speakers.

Don’t fight the Fed

The dollar is lower as higher inflation readings are seemingly par for the course as far as the Fed is concerned. They have been arguing that significant spare capacity means these numbers will drop back towards its 2% target in due course. Bond yields are also lower having popped higher on the J&J news. If housing prices especially continue on their upward path, together with rapid job creation, then the Fed may have to change course, but “Don’t’ fight the Fed” is a phrase that has stood the test of time!

Dollar rolling over

The withdrawal of the Johnson & Johnson vaccine is a blow to the ongoing reopening of the world’s biggest economy. We said last week that USD was at an important juncture and the 200-day moving average looks to be capping any upside. A strong close below 92 could see the DXY break its recent narrow range and move towards 91.50 in the near term.

Bitcoin hits new record highs

The premier cryptocurrency looks to be breaking out in a textbook fashion. We’ve seen a series of higher highs and higher lows since January with the 50-day moving average supporting prices along the way. After cracking $60,000, prices have now pushed above $63,000 with the public offering of Coinbase adding to the euphoria of cryptos in general.

Uwaga: Na treść niniejszego artykułu składają się opinie osób prywatnych i nie powinny być one odbierane jako treści zawierające porady osobiste oraz/albo inwestycyjne oraz/albo oferty oraz/albo namowę do zawierania dowolnych transakcji instrumentami finansowymi oraz/albo gwarancję oraz/albo prognozy. ForexTime (FXTM), a także partnerzy, przedstawiciele, kadra zarządzająca i pracownicy firmy nie gwarantują dokładności, ważności, precyzji czasowej czy kompletności jakichkolwiek udostępnionych tu informacji lub danych. Nie przyjmują również żadnej odpowiedzialności za ewentualne straty wynikłe z jakiejkolwiek inwestycji wykonanej na ich podstawie.

Pound bulls were on a roll yesterday after England moved into the second stage of the government’s roadmap out of lockdown.

While many countries across the globe were tightening lockdown restrictions amid surging Covid-19 cases, the UK was doing the complete opposite. Non-essential retail, restaurants, and pubs with outdoor spaces were reopened. Given how the easing of restrictions is expected to spark a surge in consumer spending, this development is likely to boost confidence in the UK’s economic recovery.

The key question is whether this will be enough to support the British Pound in the short to medium term. Since the start of April, Sterling has weakened against almost every single G10 currency, shedding over 1.80% against the Euro.

Easing lockdown restrictions is a welcome development for Sterling. However, political risk in the form of the upcoming Scottish parliamentary elections and concerns relating to AstraZeneca Plc’s shot could throw a proverbial wrench in the works for bulls. On top of this, an appreciating Dollar may ensure the GBPUSD remains trapped in the current bearish channel on the daily charts.

A quick look at the fundamentals

The UK GDP report this morning revealed that the economy expanded less-than-expected in February. Growth expanded 0.4% month-on-month as lockdown restrictions remained. Although this was below the 0.5% expectations, it was a solid improvement from the -2.9% in January. Industrial production and manufacturing production figures both exceeded market expectations by rising 1.0% and 1.3%, respectively month-on-month. Unsurpsingly, the Pound offered a muted reaction with prices trading around 1.3745 as of writing.

Technicals swing in favour of bears….

From a technical perspective, the GBPUSD remains under pressure on the daily charts. Prices are trading below the 20 Simple Moving Average while the MACD trades below 0. There seems to be support around the 1.3670 level which is coincidentally above the 100 Simple Moving Average. A solid breakdown and daily close below this level could open the doors towards 1.3570 and 1.3500.

Should 1.3670 prove to be reliable support, a rebound back towards 1.3900 could be a possibility.

For my intraday traders, a potential breakout opportunity is forming on the hourly timeframe. Support can be found at 1.3725 while resistance at 1.3770. If Pound bulls are still in the game, prices may venture towards the 1.3770 level before testing 1.3800. Alternatively, an hourly close under 1.3725 could open the doors towards 1.3670.

Uwaga: Na treść niniejszego artykułu składają się opinie osób prywatnych i nie powinny być one odbierane jako treści zawierające porady osobiste oraz/albo inwestycyjne oraz/albo oferty oraz/albo namowę do zawierania dowolnych transakcji instrumentami finansowymi oraz/albo gwarancję oraz/albo prognozy. ForexTime (FXTM), a także partnerzy, przedstawiciele, kadra zarządzająca i pracownicy firmy nie gwarantują dokładności, ważności, precyzji czasowej czy kompletności jakichkolwiek udostępnionych tu informacji lub danych. Nie przyjmują również żadnej odpowiedzialności za ewentualne straty wynikłe z jakiejkolwiek inwestycji wykonanej na ich podstawie.

The euro has seen a recovery of late, strengthening against most of its G10 peers so far this month except for versus the Swiss Franc and the Swedish Krona.

Such a performance is reflected in the EUR index climbing by more than one percent on a month-to-date basis. This is an equally-weighted index, comprising the following currency pairs:

• EURUSD
• EURCHF
• EURGBP
• EURNZD
• EURCAD
• EURAUD

A couple of key technical events have transpired of late that should form a more solid base for this index to climb higher.

Firstly, prices have formed a higher high and have breached its 50-day simple moving average (SMA). Meanwhile, its MACD has recently moved above the base line of 0.

A sustained break above the 1.3210 line, which was the resistance level form early March and also the support level for some early February price action, could ultimately lead the EUR index to the 1.3277 mark. Otherwise, a break back below its 50-SMA could open a path back towards the 1.3100 mark.

Euro’s fate depends on key data

The euro has been able to hold on to recent gains, following its better-than-expected February retail sales data that was announced yesterday. It rose by 3% compared to January, beating estimates of 1.7%. The year-on-year figure shrank by 2.9%, which is still better than the 5.3% decline that markets had expected. Both the month-on-month and year-on-year prints also fared better than January’s figures.

Investors will have to several key events to monitor over the coming days that could determine the shared currency’s performance over the course of the week:

Tuesday, April 13

• ZEW survey expectations

Wednesday, April 14

• EU industrial production
• ECB President Christine Lagarde speech

Friday, April 16

• March inflation (final print)

Euro’s outlook mixed

Intriguingly, the 25 delta risk reversals show that markets are bullish on the euro’s performance against all other G10 currencies, except against the Japanese Yen, for the next 2-month period.

Meanwhile, the latest data from the CFTC (Commodity Futures Trading Commission) for the week of April 6 shows a mixed outlook for the euro. Leveraged funds have raised their net-short positions on the euro to the highest since July. On the other hand, asset managers have increased their net euro longs to reverse two consecutive weeks of paring back such positions.

Note that the EU recovery fund that’s worth 750 billion euros is due to course its way through the bloc in the middle of this year, once it is ratified by member countries. Such financial aid is set to offer more help to the continent’s recovery into the post-pandemic era.

Until then, it is imperative that the continent has a firm grip on the pandemic and gets its vaccination drive back on track to catch up with the inoculation rates seen in the UK and the US. That could form the basis for its economic recovery which could then translate into a sustained rebound for the euro.

Uwaga: Na treść niniejszego artykułu składają się opinie osób prywatnych i nie powinny być one odbierane jako treści zawierające porady osobiste oraz/albo inwestycyjne oraz/albo oferty oraz/albo namowę do zawierania dowolnych transakcji instrumentami finansowymi oraz/albo gwarancję oraz/albo prognozy. ForexTime (FXTM), a także partnerzy, przedstawiciele, kadra zarządzająca i pracownicy firmy nie gwarantują dokładności, ważności, precyzji czasowej czy kompletności jakichkolwiek udostępnionych tu informacji lub danych. Nie przyjmują również żadnej odpowiedzialności za ewentualne straty wynikłe z jakiejkolwiek inwestycji wykonanej na ich podstawie.