Early morning call: US earnings season in sight

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US dollar remains steady following jobs data release

The US dollar remained steady on Monday, after having been shaken on Friday afternoon at the release of non-farm payrolls. Friday's data showed that the US economy created 216,000 jobs in the last month of 2023, more that the 173,000 of November and higher that the 170,000 expected. The unemployment rate remained at 3.7% and average hourly earnings rose to 4.1% YoY after 4% the previous month. Economists saw it cooling to 3.9%.

The labour market is no longer as tight as it was earlier in the year, but job growth remains solid, which leads economists to think that Fed Funds Rates will remain unchanged for the next few months. A week ago, market pricing showed a 90% chance of a Fed rate cut in March. Post non-farm payrolls, this is down to 64%.

The next test for the dollar will be US consumer price index on Thursday. Headline CPI should come at 3.2% YoY, one notch higher than the previous month. Core CPI growth is also expected to accelerate, to 4% YoY, from 3.8% the previous month.

More Christmas retail trading updates incoming

After a first taste last week with Next, Christmas retail trading updates will be in full swing this week, with among them three UK supermarket chains, Tesco, Sainsbury's and Marks and Spencer. Mastercard data, which measures both in-store and online retail sales, showed a 2.6% rise in sales value between 1 November and 24 December period compared to last year. An increase in value due to high inflation, not because consumer purchased more items. In volumes, sales are expected to fall by 4.1%.

New US earnings season in sight

On Friday, four major US banks will kick off this new earnings season. The largest of them all, JPMorgan is set to report earnings of $3.53 per share, down 0.7% on the same quarter a year ago, but revenue is expected to rise by 11.8% to $39.8 billion, boosted by the ongoing integration of First Republic Bank into its business. In the last twelve months, JPMorgan performed better than its US peers, gaining around 27% in the period. Since the very end of October, JPMorgan shares have been almost constantly rising, setting a new all-time high last Thursday.

On the other end of the spectrum is Bank of America. EPS is anticipated to fall by nearly 20% to 68 cents. Revenue is also expected to decline 2.6% to $24 billion. Bank of America lagged the broader industry in 2023, only gaining 0.9%. An underperformance partly due to a slower recovery from the March 2023 US banking turmoil. That said, the stock has gained 37% since the end of October, and now trades at a ten-month high.

In Q4 2023, bond yields fell on expectations of rate cuts ahead. US 10-year Treasury yields eased sharply from a 5.02% peak to just over 4% currently. Falling yields may aid to ease some pressures on the banks' funding costs. Wells Fargo and Citigroup are the other two bank due to report on Friday. Goldman Sachs and Morgan Stanley will report on Tuesday 16 January.

Also on Friday, healthcare giant UnitedHealth is due to report before market open. Analysts anticipate earnings of $5.99 per share on revenue just short of $92 billion. Three months ago, the group raised its full-year forecast on the back of stronger-than-expected results driven by an increase of its customer base.

All eyes will be on the share price of the airline carriers impacted by the grounding of dozens of Boeing planes. It’s after the US airline regulator ordered the grounding of some Boeing 737 Max 9 jets after part of one plane fell off during an Alaska Airlines flight on Friday. The Federal Aviation Administration (FAA) said the inspections would affect 171 planes operated by US airlines or in US territory. Alaska and United Airlines said late Saturday that they were grounding their entire fleets of Boeing 737 Max 9s.