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World Week Ahead: US earnings season

Monday 10th April 2017

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In a week shortened to four days by Good Friday, investors will look to the pending US earnings season as a reality check on valuations.

Citigroup, JPMorgan Chase, and Wells Fargo are among US companies scheduled to report their latest quarterly results in the coming days. 

The financial sector is projected to post a 15.4 percent profit gain, second only to energy among S&P sectors, according to Reuters.

Last Friday Wall Street’s three benchmarks closed marginally weaker, each down less than 0.1 percent, after the US launched a cruise-missile strike on Syria and a report showing American employers added fewer jobs than expected in March.

The Labor Department report showed payrolls climbed by 98,000 in March, after a downwardly-revised 219,000 increase in February. Even so, the unemployment rate dropped to 4.5 percent, the lowest since May 2007, while hourly wages rose at a 2.7 percent year-over-year pace.

Analysts remained optimistic about the US economy, attributing March’s headline miss to poor weather.

“Aside from the payroll data, all the other underlying details are encouraging,” Tom Simons, an economist at Jefferies in New York, told Bloomberg. “People are re-entering the labour force and it looks like they’re getting jobs right away. The participation rate being steady is encouraging there.”

This week the latest US economic data will arrive in the form of reports on the labour market conditions index, due today; the NFIB small business optimism index and JOLTS, or the Job Openings and Labour Turnover Survey, due Tuesday; import and export prices, Atlanta Fed business inflation expectations, due Wednesday; weekly jobless claims, producer price index, and consumer sentiment, due Thursday; as well as the consumer price index, retail sales, and business inventories, due Friday. 

Federal Reserve chair Janet Yellen is set to speak in Ann Arbor, Michigan, today, while Minneapolis Fed President Neel Kashkari will speak on Tuesday. Both will be closely watched for clues on the pace of rate increases as well as plans to reduce the central bank’s balance sheet.

Wall Street's top banks see the Fed laying out by year end its plan to scale back reinvestments in Treasuries and mortgage-backed securities, according to a Reuters poll.

Five of 15 primary dealers, or banks that do business directly with the Fed, expected it to start paring reinvestments by year end, while the rest forecast the central bank would do so by the end of the second quarter of 2018, Reuters reported. 

Last week, the Dow Jones Industrial Average slipped 0.03 percent, the Standard & Poor’s 500 Index declined 0.3 percent, and the Nasdaq Composite Index slid 0.6 percent.

“While investors may be struggling to find reasons to get into the market, they also realise the reasons to sell are limited,” strategists at Voya Investment Management said in a note Friday, Bloomberg reported. 

Financial markets will be closed on Friday.

In Europe, the Stoxx 600 Index closed 0.1 percent higher on Friday. 

One unknown as the week begins is a potential fresh geopolitical flashpoint.

The US Navy is moving a strike group, including an aircraft carrier, toward the Korean peninsula as a show of force, according to a Reuters report.






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