Great Start To Earnings, Oil Steadies, Gold Pulls Back

Great Start To Earnings, Oil Steadies, Gold Pulls Back

Ed Moya  | Jan 14, 2020 10:56

JP Morgan kicked off earnings season with a bang! Expectations were for the banks to have a decent start after we saw the yield curve uninvert itself in early September, which will broadly help net interest income for all the banks. JPMorgan Chase & Co (NYSE:JPM) posted a stunning FICC trading gain, over US$1 billion higher than analysts’ expectation. First quarter guidance was strong regarding net interest income and shares for the largest U.S. bank were sharply higher. JP Morgan remains best of breed in banking and CEO Jamie Dimon should feel like the king of FICC trading.

Regarding the U.S. consumer, Dimon stated, “The U.S. consumer continues to be in a strong position and we see the benefits of this across our consumer businesses.”

Dimon’s comments on the U.S. consumer are not shocking anyone but provide added confirmation the U.S. record-long expansion is still running strong.

Earnings Recap

JP Morgan and Citigroup Inc (NYSE:C) impressed after posting strong banking and capital markets results, while Wells Fargo & Company (NYSE:WFC) delivered disappointing results that were highlighted with higher than expected expenses. The strong results from JP and Citi could be a good sign for consumer lenders which could mean a strong results from Bank of America (NYSE:BAC), which will report tomorrow.

Delta Air Lines (NYSE:DAL) delivered strong results as demand picked up and lower fuel prices helped their margins. Delta was also fortunate to not have any impact from the Boeing (NYSE:BA) 737 Max saga.

U.S. Inflation

The US CPI readings for December came in softer than expected across the board, showing no real inflation pressures at all. The monthly core inflation reading rose only 0.1%, missing the 0.2% estimate, which was also the prior reading. The U.S. dollar gave back some its earlier gains as the odds for further easing from the Fed however edged higher following the inflation data. If inflation expectations take a further hit later this quarter, markets will quickly start pricing in a 25-basis point rate cut this year.

Oil

Oil prices are showing signs of life following a wrath of selling pressure that wiped away the rise we saw from the OPEC+ deeper than expected cuts and U.S.-Iran war fears. Oil prices are tentatively rebounding after seller exhaustion kicked as investors await the next developments on the trade front and whether we see a strong pickup with global demand following the phase-one trade deal.

Oil also found some technical support from the 200-day simple moving average. The bearish sentiment, however, still hangs with oil as prices did not push even higher following better than expected trade data that suggests China’s economy is showing further signs of stabilizing. Demand expectations will likely wait until Thursday’s Chinese GDP data to decide if the world’s second largest economy can help drive the economic rebound in Asia. Oil volatility may calm down a bit until we get further details on the Phase One trade deal. Markets may be becoming overly optimistic on the trade front as we could easily see China come up short on delivering their promises and as the U.S. ratchets up the transatlantic trade war. Energy traders are also cautiously awaiting the next escalation from Iran and the risks of an actual to disruption to oil production is still very possible. If West Texas Intermediate crude settles below $58 a barrel, bearish momentum could target $55.50 before oversold conditions become apparent. The $60 a barrel will remain key resistance.

Gold

Gold prices are getting dragged down as trade tensions have eased in the short-term and as U.S. earnings season gets off to a great start. The banks are painting a picture that the U.S. consumer remains strong and that should support fresh record highs with U.S. stocks. Gold’s pullback may continue on continued optimism that the U.S. stock market is invincible for now, both trade and military conflict tensions ease and as the U.S. dollar stabilizes. Gold will remain the favored safe-haven trade and should start to see buyers emerge around the $1,520 region.

Ed Moya

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+