US earnings season: all eyes on the banking sector

Equity markets

Equity markets ended Thursday's session lower for the first time this week. European indices remain on track to post their first week of gains in four. The dollar rebounded after a stronger-than-expected US consumer price index (CPI).

Chinese consumer prices

In China, consumer prices faltered in September. The consumer price index missed the forecast of a 0.2% gain. Year-on-year core inflation, excluding food and fuel prices, was 0.8%, unchanged from the previous month. The producer price index fell for the 12th straight month, by 2.5% from a year earlier. Economists had predicted a 2.4% fall in September. While signs are emerging that China's economy is stabilising, this latest data indicates deflationary pressure is still a real risk.

Chinese exports and imports

China's exports and imports shrank at a slower pace for a second month in September. Outbound shipments in September declined 6.2% from a year ago, following a drop of 8.8% in August and beating economists' forecast for a 7.6% fall. Imports also fell by 6.2%, less than the 7.3% decline recorded the previous month. This resulted in a broader trade surplus of $77.71 billion in September.

Michigan consumer sentiment

Production is poised to fall by 3.5% in September Year-on-year (YoY), and over in the US at 3 p.m., Michigan consumer sentiment is expected to decline for a third straight month, to 67.2, after 68.1 in September.

The US earnings season

The US earnings season officially starts today with three major bank reports. The picture has changed in the last three months. While Q2 showed that banks had benefited from higher interest rates, they had to manage a deterioration of the economic environment, with slower loan growth and consumer spending.

JP Morgan Chase

JP Morgan Chase, the largest of them all in terms of assets, is expected to post earnings of $3.89 per share, which would be a 15% increase in the same quarter a year ago. Revenue is also forecast to rise by about 25% to $39.5 billion. But sequentially, it would translate into a decline in both the top and bottom lines.

Citigroup

Citigroup could paint a very different picture. Earnings are expected to fall year over year. The street anticipates earnings of $1.24 per share, to be compared with the $1.63 posted for Q3 last year. Revenue is expected to increase, but not by much, to $19.22 billion. Last year, revenue reached $18.5 billion. Citigroup recently underwent a major At 10 a.m. in the eurozone, industrial restructuring will begin, which means that costs will be particularly under scrutiny.

Wells Fargo

Wells Fargo's earnings per share (EPS) is forecast at $1.24 and revenue at $20.11 billion, both top and bottom lines higher than the same quarter last year. As the biggest mortgage lender in the US, Wells Fargo is more exposed to consumer patterns than any other bank. Investors are therefore keen to read how the bank envisions the coming months.

UnitedHealth

Outside the banking sector, healthcare giant UnitedHealth is due to report before the market opens. The Street anticipates earnings of $6.33 per share, compared to the $5.79 it posted the same quarter a year ago. Revenue is expected to increase substantially compared to last year, to $91.42 billion, benefiting from its efforts to diversify its portfolio. Recently, UnitedHealth executives raised the full-year earnings guidance as they expect an increase in activity in the coming months.

AI in the tech sector

Al will be talked about a lot in the coming weeks, not only in the tech sector but potentially in every industry. JPMorgan's CEO, Jamie Dimon, recently stated that artificial intelligence is already an integral part of the firm. Q3 earnings may show what impact Al might have on the investment bank's results. As for UnitedHealth, the recent acquisition of tech firm Change Healthcare shows the company looks set for an Al-supported expansion going forward.

Crude oil

Elsewhere on the commodity market, The Energy Information Agency (ElA) data confirmed the large increase in crude oil stocks announced by the API on Tuesday. Crude Oil stocks rose by 10.2 million barrels last week. Gasoline and distillate inventories fell, respectively, by 1.3 and 1.8 million barrels. Now oil inventors await Baker Hughes rig count data. Last Friday, the total rig count fell further to 619. The number of oil rigs in operation fell by five to 497, a new 19-month low.