Investing.com — Quarterly corporate earnings season continues Tuesday.with bank of america morgan stanley Latest reports from major banks in the country. Elsewhere, China’s growth was stronger than expected, while UK wage growth showed signs of stabilizing.
1. Big banks continue to report.
The first-quarter earnings season continues on Tuesday, with all eyes on the U.S. banking sector as both Bank of America (NYSE:) and Morgan Stanley (NYSE:) are scheduled to report.
JPMorgan Chase (NYSE:), citygroup (New York Stock Exchange:) and wells fargo (NYSE:) After a disappointing start to the season on Friday, Goldman Sachs (NYSE:) boosted full-year profits on the back of a recovery in underwriting, trading and fixed income trading in the first quarter. The team turned the tide with strong numbers. The share was the highest since late 2021.
Other important reports are also scheduled, including Johnson & Johnson (NYSE:), UnitedHealth (NYSE:), and United Airlines (NASDAQ:).
According to BofA Global Research, the first quarter earnings season has begun, with 30 companies reporting earnings that exceeded profits by 6% so far.
But Evercore ISI strategists say earnings expectations are likely to weaken as companies issue more cautious outlooks.
“We believe the outlook for the company has become more cautious and EPS will be revised downwards,” Evercore said in a research note on Sunday.
Evercore said it is taking a defensive stance, expecting “intensified volatility” and rating the consumer staples, healthcare and communications services sectors as “outperform.”
2. Futures maintain recent weakness
U.S. stock futures edged lower on Tuesday, continuing recent weakness as investors digested corporate earnings, bond yields rose and geopolitical tensions in the Middle East escalated.
By 04:00 ET (08:00 GMT), the contract was down 20 points, or 0.1%, and down 3 points, or 0.1%, but was trading largely unchanged.
The major indexes posted sharp losses on Monday, dropping nearly 250 points, or 0.7%, erasing most of this year’s gains, with the S&P 500 down 1.2% and 1.8% lower.
The benchmark has risen to its highest level since November, weighed down by rising bond yields, after the release of strong data made it more likely that rate cuts will be delayed until later this year.
Risk appetite has also been hit by heightened tensions in the Middle East after Iran launched drones and missiles at Israel over the weekend.
The Economic Calendar includes data for March, as well as the release of the latest readings for and , providing further insight into the health of the housing sector.
3. China’s economy grew strongly in the first quarter
China’s economy grew faster than expected in the first quarter of 2024, as the government’s sustained economic stimulus measures boosted business activity.
It rose 5.3% year-on-year in the first three months of this year, according to data released by the Office for National Statistics on Tuesday. This number beat expectations for a 4.8% increase and improved from the previous quarter’s 5.2% increase.
GDP increased by 1.6% in the quarter, improving from the previous month’s 1% increase.
The Chinese government has announced fiscal and monetary policy measures to achieve its GDP growth target of approximately 5% in 2024, and last year’s growth rate of 5.2% was due to the impact of the coronavirus pandemic in 2022. It is likely that it will continue to improve as it recovers from the blow.
The indicator comes after Purchasing Managers Index data released for the first three months of 2024 showed an improvement in corporate activity, particularly in the manufacturing sector.
But other indicators released on Tuesday showed the world’s second-largest economy is struggling to build a strong and sustainable post-COVID-19 recovery, especially weighed down by a prolonged real estate downturn. It depicts a weaker situation.
Sales rose 4.5% year-on-year in March, missing the expected 5.4% increase and slowing from 7% in the first two months of the year.
Year-on-year growth in March was 3.1%, falling short of the expected 5.1% and slowing significantly from 5.5% in the previous two months.
All of this suggests that Chinese authorities need to continue to stimulate the economy to meet year-end growth expectations.
4. UK core wage growth slows
The Bank of England kept interest rates at their highest level since 2008 at a meeting last month, after which the governor said the UK economy was heading towards a point where the central bank could start cutting interest rates.
Bailey said there were “further encouraging signs that inflation is coming down” but said the Bank of England needed more confidence that price pressures were fully under control.
One of the bank’s main concerns was the possibility of wage-driven inflation, which may have been partially alleviated by the latest figures released early on Tuesday.
Core wage growth in the UK slowed again in the three months to February, the weakest growth since the three months to September 2022.
According to the National Bureau of Statistics, regular sales rose 6.0% year-on-year, slowing down from the 6.1% increase in the November-January period.
Growth, which includes more volatile bonus payments, was unchanged at 5.6%.
Traders generally expect rate cuts to begin in either August or September.
5. Uncertain outlook for the situation in the Middle East
Oil prices stabilized on Tuesday as traders digested China growth data and an uncertain outlook for the Middle East.
By 4 a.m. ET, futures were little changed at $85.39 per barrel, and the contract was flat at $90.10 per barrel.
Data shows China’s economy grew faster than expected in the first quarter [see above] The recovery in the world’s largest oil importer has been the main bullish factor driving the outlook for this year, supporting oil markets.
Oil prices rose last week to their highest since October, but Iran’s weekend attack on Israel proved less damaging than expected and the rapidly escalating conflict has hit supplies from the oil-rich region. It fell on Monday as concerns that the stock price would be affected eased.
As Iran is a major producer within the Organization of the Petroleum Exporting Countries and produces more than 3 million barrels of crude oil per day, the focus is on how Israel will respond to Iran’s first-ever direct attack.
