While you were sleeping: JPMorgan boosts mood

Friday 15th July 2016

US equities climbed, lifting the S&P 500 to a new record, after better-than-expected quarterly results from JPMorgan Chase bolstered the mood at the start of a fresh earnings season.

In 2.38pm trading in New York, the Dow Jones Industrial Average climbed 0.7 percent, while the Nasdaq Composite Index gained 0.5 percent. In 2.23pm trading, the Standard & Poor’s 500 Index added 0.5 percent. Earlier in the session the S&P 500 climbed to a record 2,168.99.

Gains in shares of Goldman Sachs and those of JPMorgan, recently up 3 percent and 2 percent respectively, led the advance in the Dow.

“We saw a significant beat from JPMorgan and that's helping the psychology of the market,” Art Hogan, chief market strategist at Wunderlich Securities in New York, told Reuters.

"With the weaker [US] dollar helping commodities and better-than-expected economic data, the market is taking the path of least resistance with an upward bias,” Hogan noted.

JPMorgan posted both profit and revenue that exceeded analysts’ estimates. It also offered a reassuring take on the implications of the UK’s decision to leave the European Union, known as Brexit.

Brexit was a “political and economic challenge that will take time to resolve, but not a financial crisis, and the impact on global growth and the US economy should be small,” JPMorgan Chief Financial Officer Marianne Lake said in a call with reporters, according to Bloomberg.

“We had broad-based demand for loans pretty much across categories, whether it was auto, business banking, cards, so I would say that speaks well for the US economy and the consumer in particular,” according to Lake.

Meanwhile, shares of Monsanto traded 2.5 percent stronger at US$103.65 as of 12.34pm in New York. Germany’s Bayer said it raised its all-cash offer to Monsanto shareholders to US$125 a shares, up from its previous offer of US$122 a share, verbally on July 1 and in an updated proposal submitted to Monsanto on July 9. Earlier in the session Monsanto climbed as high as US$107.72.

Bayer said it also offered a US$1.5 billion "reverse antitrust break fee, reaffirming its confidence in a successful closing.”

The revised bid values Monsanto at about US$65 billion, according to the Wall Street Journal. Monsanto previously rejected a US$62 billion Bayer offer.

In Europe the Stoxx 600 Index finished the session with an advance of 0.8 percent from the previous close. France’s CAC 40 index increased 1.2 percent and Germany’s DAX index rose 1.4 percent.

“A lot of fund managers are holding a lot of cash and they have to buy if markets go higher,” Simon Wiersma, an Amsterdam-based investment manager at ING Bank, told Bloomberg. “That’s why this may become one of the most hated rallies we’ve seen. Not that good, but certainly not bad enough not to join. Earnings were far better than expected and it seems Brexit thoughts were too negative.”

The UK’s FTSE 100 index slipped 0.2 percent.

The Bank of England kept its key interest rate steady, with the Monetary Policy Committee voting by a majority of 8 to 1 to maintain the key Bank Rate at 0.5 percent, with one member voting for a cut in the rate to 0.25 percent. The BOE signalled it might cut in August.

"Most members of the Committee expect monetary policy to be loosened in August," according to minutes from the July 13 meeting.

BusinessDesk.co.nz

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