Early Morning Call: sterling gains as market awaits Chancellor's new fiscal measures

Equity markets

Equity markets start the week in negative territory.

In the Asia-Pacific region, Japan’s Nikkei 225 ended the session 1.16% lower, Australia S&P/ASX 200 fell 1.40%.

In Europe, the main indices started the session around 0.5% lower.

Currencies

On the currency market, sterling rose against the dollar, the euro and the yen this morning following the nUK government's second fiscal u-turn announced on Friday.

The yen remains weak, near 32-year lows against the dollar. Currency traders are waiting for signs of another Bank of Japan (BoJ) intervention to support the Japanese currency.

US earnings

Last Friday, four major US banks opened this quarter's earnings season. If some of them beat estimates, they all reported a fall in profits as investment banking was hit hard.

At lunch time it will be Bank of America's (BofA) turn to report its earnings for the third quarter (Q3). Analysts expect on average earnings of 77 cents per share. That is to be compared with earnings per share (EPS) of 85 cents in Q3 2021. Revenue is expected to rise by 3.3% of $23.53 billion.

Investors are particularly waiting for details on the bank's investment banking division. Shares of Bank of America, an all-session stock on the IG platform, have fallen about 31% over the past 12 months.

Also note that the last of the US big banks, Goldman Sachs , is scheduled to report tomorrow. Analysts anticipate earnings of $7.80 per share on revenue of $11.39bn. According to the Wall Street Journal, the bank plans to combine its investment banking and trading divisions, and merge asset and wealth management.

Outside the banking sector, the US earnings season is gathering pace this week. Tomorrow after the US closing bell Netflix reports its numbers. Besides expecting earnings of $2.18 per share and revenue of $7.8bn, analysts perhaps more importantly await subscriber figures. Last quarter the market was pleasantly surprised when Netflix revealed a loss of 970,000 subscribers, lower than the two million forecast.

Attention will also be given to the group's guidance on its advertising strategy. Last Thursday, Netflix announced a new ad-supported subscription plan of $6.99 per month. The plan will be available in 12 countries including the UK, US, Canada, Mexico and Australia. Note for comparison that Disney+ charges $7.99 at its budget end with ads.

On Wednesday, also after the bell, Tesla is due to publish record revenues on the back of record high deliveries. The street expects the electric car maker to post earnings of $1.04 per share, and a 62% increase in revenue year-on-year (YoY) to $22.65bn.

Q3 saw an increase in production at Tesla's plants in Texas and Berlin, and Covid restrictions that impaired production at its Shanghai plant have been lifted. Apart from revenue, this should also help margins to recover after the 500-basis point dip to 27.9% encountered in the second quarter, although higher material cost could partly pare gains.

Other US earnings expected throughout the week include Johnson & Johnson on Tuesday; IBM, Procter & Gamble and Alcoa on Wednesday; American Airlines, Dow and Philip Morris on Thursday; and American Express, Schlumberger and Verizon on Friday.

Commodities

Oil prices have shown modest gains this morning.

Last Friday, Baker Hughes total rig count rose by seven to 769. The number of oil rigs in operation increased by eight to 610, while the number of operational gas rigs fell by one to 159.