12.01 - All you need to know this Friday
Markets are busy this Friday as a lot of new developments are taking place. The earnings season for the fourth quarter is kicking off today. Elsewhere, the Euro jumped to 3-years high levels enjoying the USD’s recent declines. Oil prices are on the way for a 3% weekly gain. Here are the top things to know for today’s trading in global financial markets.
Friday marks the “unofficial” start to the fourth quarter earnings season as JP Morgan steps up to the plate as the first Dow component and big bank to reveal figures.
The blue-chip financial institution will report its numbers at around 12:00 GMT in what is widely expected to be a “messy” quarter for bank earnings due to the recent tax overhaul.
Despite the fact that lenders are expected to benefit from the legislation, they will first have to adjust deferred tax assets and liabilities to account for a lower corporate rate, and also take charges related to other tax changes.
JP Morgan is estimated to take about a 35% hit to net income from the adjustments.
On the other hand, Wells Fargo -which reports earnings at 13:00 GMT Friday- is expected to report a $2.5 billion boost to its bottom line largely because it will owe less tax in the future on income from a set of businesses including mortgage servicing.
Market participants will digest the latest U.S. inflation figures from the last month of 2017 at 13:30 GMT. Annual headline inflation is expected to ease to 2.1% from November’s reading of 2.1% while core CPI is forecast to stand pat at 1.7%.
Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.
Although the Fed’s next decision comes on January 31, markets have penciled in the next rate hike for March with odds at 68%.
Also on Friday’s docket, December retail sales will accompany inflation figures at 13:30 GMT.
Ahead of Friday’s data, the dollar hit fresh four-month lows with particular pressure coming from the euro as investors speculated that the European Central Bank is preparing to wind down its massive stimulus program.
On Thursday, minutes from the last ECB meeting showed that the euro zone monetary authority had taken into account the positive economic momentum and policymakers believed that “language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year”.
Euro-dollar broke through the 1.20 level on the news and the rally continued on Friday taking the pair to a three-year high above 1.21.
At 10:53 GMT, EUR/USD gained 0.76% to $1.2122, placing pressure on the U.S. dollar index which fell 0.56% to 91.15.
Oil prices pulled back from its highest level since December 2014 as investors took profit after five consecutive sessions of gains.
U.S. crude oil futures fell 0.39% to $63.55 at 10:54 GMT, while Brent oil lost 0.06% to $69.22.
The U.S. benchmark was still on track for weekly gains of more than 3% although weak oil data from China weighed on prices. China's crude oil imports in December eased to 33.7 million metric tons, or 7.97 million barrels per day, versus 37.04 million metric tons in November, customs data showed on Friday.
Later on Friday, market participants will also keep an eye on U.S. shale production when Baker Hughes releases its most recent weekly rig count data.
Last week that oil services provider said that oil rigs operating in the U.S. declined from 747 to 742, helping to soothe concerns that increases in American production would derail OPEC’s attempts to curb output and rebalance global markets.
- by Roger Gain