Early Morning Call: watching euro, yen; US earnings gather pace

Equities outlook

The US session was positive on Friday, with the Dow Jones Industrial Average up 2.15%, led by financial stocks.

JPMorgan Chase & Co (All Sessions), Goldman Sachs Group Inc (All Sessions) and American Express Co (All Sessions) clinched the best performances among the index constituents. Today marks the conclusion of the main US banks quarterly reports. While JPMorgan, Morgan Stanley and Wells Fargo & Co (All Sessions) disappointed investors with earnings and revenue below expectations, Citigroup Inc (All Sessions) surprised the market in a positive manner, sending its share price 6% higher during last Friday's session.

Today we are expecting reports from Bank of America Corp (All Sessions) and Goldman Sach. Analysts anticipate the Bank of America will produce earnings of 78 cents per share, a decrease of 2.8% compared to the same quarter a year ago. Revenues are expected to rise by 5.6% to $22.82 billion. Bank of America shares have tumbled year-to-date, losing more than 30%.

Goldman Sachs is forecast to report earnings of $6.77 on revenue of $10.84bn. Last year was a strong year for Goldman Sachs, as it benefitted fully from upbeat underwriting and M&A activity. This year is very different though. In the first quarter (Q1), the bank saw a decline of 36% of its investment banking unit, and many analysts expect second quarter (Q2) performance along those lines.

Tonight, after the US closing bell, IBM Corp (All Sessions) will be the first of the big tech firms to produce quarterly earnings. Analysts expect earnings per share (EPS) of $2.27, on revenue of just over $15bn.

The US earnings season will be gathering pace this week, with reports expected from Johnson & Johnson (All Sessions), Netflix Inc (All Sessions), Tesla Inc, American Airlines Group Inc and American Express Co (All Sessions) to name just a few.

Macro outlook

There are very few macroeconomic indicators expected today.

In New Zealand, consumer price index (CPI) increased by 7.3% in the second quarter, its fastest pace in 32 years. Most economists expect the Reserve Bank of New Zealand (RBNZ) to raise rates by another 50 basis points (bps) next month, but this latest data raises the possibility of a supersized hike.

Several central bank announcements are scheduled throughout the week. On Tuesday, the Reserve Bank of Australia (RBA) will release the minutes of its July meeting, when it announced a 50 basis-point hike for its cash rate to 1.35%.

China Loan Prime Rates are due on Wednesday. Markets don't see any change to the one-year and five-year rates, as the country continues to reopen after some easing of coronavirus restrictions.

Then on Thursday, the Bank of Japan (BoJ) is expected to remain on its very own path of ultra-accommodating policy.

And, last but not least, the Eurpean Central Bank (ECB) is expected to kick off with a 25 basis-point rate hike. This will be its first rate increase in more than a decade.

Commodities

Oil prices remain near three-month lows as the rising number of Covid cases in China feed concerns about global demand.

Last Friday, Baker Hughes total rig count rose by four to 756. The number of oil rigs in operation rose by two to 599, the number of working gas rigs also rose by two to 157.