Market Update
Asian Markets Eased, Japan's Trade Deficit Expanded, China Banks Hold Rates
Arjun Pandit
20 Apr, 2023
Mumbai
Markets in Asia traded mixed with a downward bias and investors digested the latest earnings releases from the companies in the region and around the world.
China's commercial lenders kept lending rates unchanged for one-year and five-year loans, the National Bureau of Statistics reported Thursday.
Banks left one-year lending prime rate at 3.65% for the eighth month in a row and 5-year reference rate, used for home lending, was held at 4.3%.
Earlier in the week, the People's Bank of China left its medium-term policy rate at 2.75%.
The Nikkei index increased 0.2% to 28,672.85, the Shanghai Composite Index fell 0.7% to 3,345.36 and the Hang Seng Index decreased 0.1% to 3,345.36.
Markets in South Korea decreased 0.2% and the benchmark index in Australia was unchanged.
Benchmark indexes in India attempted a rebound after three days of weak trading amid better-than-expected earnings from domestic corporations.
In Mumbai, investors turned cautious on the worries that crude oil prices may rebound faster after a stronger-than-expected first quarter GDP rebound in China.
India imports about 70% of its energy needs, and higher crude oil prices fuel domestic inflation.
Japan's International Trade Deficit Expanded In March
Japan reported a rise in its trade deficit for the 20th month in a row, after imports rose faster than exports, the Ministry of Finance reported Thursday.
Trade deficit advanced to ¥754.7 billion in March from ¥464.9 billion a year ago and stretched the longest stretch of deficit since 2015.
Imports increased 7.3% to ¥9,578.8 billion and exports increased 4.3% to ¥7,654.7 billion.
Exports increased for the 25th month in a row and imports advanced 26th month in a row on rising commodities and energy prices.
Higher energy prices expanded the trade deficit in the first quarter to ¥5,151.2 billion from ¥3,375.9 billion a year ago.
If commodities and energy prices continue to remain elevated, Japan is likely to record its third annual trade deficit in a row following the shortfall of 19,971.3 billion in 2022.
Japan's Trade Deficit Expanded 20th Month In a Row In March
Brian Turner
20 Apr, 2023
New York City
Japan reported a rise in its trade deficit for the 20th month in a row, after imports rose faster than exports, the Ministry of Finance reported Thursday.
Trade deficit advanced to ¥754.7 billion in March from ¥464.9 billion a year ago and stretched the longest stretch of deficit since 2015.
Imports increased 7.3% to ¥9,578.8 billion and exports increased 4.3% to ¥7,654.7 billion.
Exports increased for the 25th month in a row and imports advanced 26th month in a row on rising commodities and energy prices.
Higher energy prices expanded the trade deficit in the first quarter to ¥5,151.2 billion from ¥3,375.9 billion a year ago.
If commodities and energy prices continue to remain elevated, Japan is likely to record its third annual trade deficit in a row following the shortfall of 19,971.3 billion in 2022.
After Mixed Batch of Earnings, Stocks Wavered, Treasury Yields Advanced, Oil Eased
Barry Adams
19 Apr, 2023
New York City
Benchmark indexes opened lower but stocks managed to climb above flatline after investors digested a fresh batch of earnings.
Major averages steadily advanced after the first hour of trading and crossed the flatline after 2:00 p.m. ET and treasury bond yields inched higher.
Western Alliance Bancorp soared 40% after the regional bank said deposits increased $2.0 billion, reversing the fall after the collapse of Silicon Valley Bank on March 10.
Investors are looking ahead to quarterly results of Zions Bancorp, another regional bank in focus, after the close on Wednesday.
So far regional banks are holding on to bank deposits despite the losses in securities held for maturity caused by the rapid rise in interest rates, a strong vote of confidence from depositors.
Deposit outflow from regional banks to larger rivals and to Treasury securities have appeared to ebb, providing critical support to the regional banks.
But, banks have not passed on higher rates to depositors, and expanded net interest margin to drive profitability higher.
Morgan Stanley, Bank of New York Mellon, U.S. Bancorp reported better-than-anticipated quarterly results, despite the ongoing weakness in investment banking revenues.
The Federal Reserve has lifted rates nine times in the last thirteen years, but banks have still not raised rates on deposits but banks have passed on higher rates to borrowers.
Consumers are getting hit from all sides, higher inflation drives higher the cost of living and savers are still not rewarded by banks and wages are lagging overall inflation.
Current drivers of inflation are fuel prices, housing market and above inflation price increases carried out by corporations, which are all hitting consumers and families hard.
Manufactured goods price increase and service inflation were the main drivers of profit for the last five quarters, the trend reflected in the latest quarterly results.
United Airlines reported a sharp decline in quarterly loss after revenues soared, reflecting higher prices per available seat mile.
Home Affordability and High Rates Dampens Demand for Mortgages
Mortgage applications in the week ending on April 14 declined after rates rose and buyers struggled with elevated home prices, the Mortgage Bankers Association reported Wednesday.
Mortgage applications fell 8.8% reversing the gain of 5.3% in the previous week.
The average contract rate for 30-year fixed-rate mortgage, for loan balances less than $726,000, increased to 6.43%.
Home purchase mortgage applications dropped 10% and refinance applications declined 5.8%.
“Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act,” MBA's chief economist Joel Kan noted in the weekly release.
U.S. Indexes & Yields
The S&P 500 index increased 1.58 points to 4,156.72 and the Nasdaq Composite index increased 19.95 points to 12,173.11.
The yield on 2-year treasury notes rose to 4.26%, 10-year treasury notes advanced to 3.60% and 30-year treasury bonds to 3.79%.
Crude oil fell $1.57 to $79.28 a barrel and natural gas futures fell 14 cents to $2.21 a thermal unit.
U.S. Stock Movers
Tesla Inc decreased 2.2% to $180.25 after the electric vehicle maker lowered prices on some of its models for the sixth time this year.
Netflix Inc declined 1.8% to $327.59 after the video streaming services provider reported better-than-expected earnings in the first quarter but offered weak second quarter outlook.
Morgan Stanley declined 3% to $87.0 after the financial services provider said first quarter revenue and earnings fell.
Revenue in the first quarter decreased to $14.5 billion from $14.8 billion and net income dropped to $3.0 billion from $3.7 billion and diluted earnings per share eased to $1.70 from $2.02 a year ago.
Revenue in the institutional securities segment decreased to $6.7 billion from $7.8 billion, wealth management increased to $6.5 billion from $5.9 billion and investment management declined to $1.28 billion from $1.33 billion a year ago.
Assets under management dropped to $1.34 trillion from $1.44 trillion a year ago.
Fox Corp Class A stock declined 0.7% to $33.75 after the company agreed to pay $787.50 million to settle a lawsuit brought by Dominion Voting System and avoided a 6-week trial.
Dominion had asked for $1.6 billion in damages but settled for a smaller amount after Fox News and its cable affiliates repeatedly aired false claims that the voting machine maker had helped rig the 2020 presidential election in favor of Joe Biden against Donald Trump.
European Markets On Hold After Rate Path Worries Resurfaced
European markets paused but stayed near the record territory as rate path worries resurfaced.
The latest reading on consumer price inflation, showed the stubborn nature of inflation forces, as the headline inflation stayed above 10.0% and core inflation hovered near the record level reached six months ago.
After the inflation data, traders forecasted another 25 basis points increase in UK's interest rates after the policy meeting on May 11.
But investors are still divided on the next moves from the U.S. Federal Reserve. Most investors are anticipating a rate hike of 25 basis points on May 3rd, but the rate path is uncertain after.
Markets anticipating that the Fed may pause after the rate hike in May but terminal rates may rise to as high as 5.75%.
On the earnings front, Heineken reported larger-than-expected decline in beer sales in the first quarter but reaffirmed its annual earnings outlook.
ASML Holding, the Netherlands-based semiconductor chip equipment maker, reported better-than-expected earnings.
Euro Area Core Inflation Accelerated In March
The Euro Area consumer price inflation eased for the fifth month in a row, Eurostat reported Wednesday.
The annual rate of price increase in March slowed to 6.9%, the lowest level since February 2022 and significantly lower than the peak rate of 10.6% in October.
Despite the decline in overall rate of inflation, core inflation which excludes food and energy, accelerated to record high 5.7%.
The rise in core rate put the stock market on alert and raised the prospect of the European Central Bank continuing its aggressive rate hike policy.
Service inflation accelerated to 5.1% from 4.8% in February and food, alcohol and tobacco inflation expanded to 15.5% from 15.0% respectively.
Energy prices declined 0.9% in March, first month of price decline in two years.
UK Consumer Inflation Stays Above 10%
The consumer price inflation rate eased to 10.1% in March from 10.4% in February, the Office for National Statistics reported Wednesday.
The consumer price inflation remained above 10% for the seventh month in a row and well above the 2% target set by the Bank of England.
Inflation was driven by price increases in food and elevated cost of energy utilities and housing.
Food and non-alcoholic beverage inflation accelerated to 19.1% from 18.0% in February and housing and utilities inflation eased slightly to 26.1% from 26.6% in the previous month.
Core rate of inflation, which excludes food and energy, rose 6.2% in March, slightly lower than the peak rate of 6.5% in September 2022.
Europe Indexes & Yields
The DAX index increased 12.59 points to 15,895.20, the CAC-40 index rose 15.81 points to 7,549.44 and the FTSE 100 index decreased 10.67 to 7,898.77.
The yield on 10-year German Bunds rose to 2.50%, French bonds ended at 3.0%, the UK Gilts increased to 3.85% and Italian bonds to 4.36%.
The euro traded at $1.095, the British pound at $1.243 and the Swiss franc at 89.83 cents.
Brent crude oil declined $1.73 to $83.04 a barrel and the Dutch TTF natural gas declined Є2.43 at Є40.30 per MWh.
Europe Stock Movers
Resource stocks were on the defensive after commodities prices eased a day after China optimism lifted prices.
Glencore Plc fell 0.9% to 493.30 pence, Anglo American plc declined 2.2% to 2,739.0 pence and BHP Group Limited decreased 0.8% to 2,520.50 pence.
Heineken Holding NV increased 1.7% to €87.50 after the company reported first quarter sales increased 9.2% to €6.4 billion.
Heineken brand beer volume rose 2.3% but overall organic beer volume declined 3% to 54.8 mhl.
ASML Holding NV decreased 2.4% to €574.70 after the advanced semiconductor equipment maker said revenue in the first quarter increased to €6.7 billion from €6.4 billion a year ago.
Net income in the first quarter increased to €1.95 billion from €1.81 billion and diluted earnings per share rose €4.96 from €4.60 a year ago.
Net booking in the quarter declined to €3.8 billion compared to €6.3 billion in the fourth quarter.
ASML forecasted second quarter 2023 net sales between €6.5 billion and €7.0 billion and a gross margin between 50% and 51%.
Movers: Ally Financial, ASML, Baker Hughes, Fox Corp, Morgan Stanley, Nasdaq, Netflix, Tesla
Scott Peters
19 Apr, 2023
New York City
Ally Financial Inc increased 1.6% to $27.29 after the company reported better-than-expected quarterly results.
Revenue in the first quarter decreased to $1.61 billion from $1.68 billion and net income plunged to $219 million from $627 million and diluted earnings per share fell to 96 cents from $1.86 a year ago.
Net interest margin decreased 42 basis points to 3.51% and provision for credit losses increased $279 million to $446 million, reflecting rising interest rates and stretched consumer finances.
ASML Holding NV decreased 3.2% to $623.12 after the advanced semiconductor equipment maker said revenue in the first quarter increased to €6.7 billion from €6.4 billion a year ago.
Net income in the first quarter increased to €1.95 billion from €1.81 billion and diluted earnings per share rose €4.96 from €4.60 a year ago.
Net booking in the quarter declined to €3.8 billion compared to €6.3 billion in the fourth quarter.
ASML forecasted second quarter 2023 net sales between €6.5 billion and €7.0 billion and a gross margin between 50% and 51%.
Baker Hughes Co increased 1.7% to $30.01 after the oilfield services provider said new orders and revenue rose in double digits in the first quarter.
Revenue increased 18% to $5.7 billion and net income soared to $576 million from $72 million and diluted earnings per share increased to 57 cents from 8 cents a year ago.
New orders increased 12% to $7.6 billion from $6.8 billion a year ago and decreased 5% from $8 billion in the fourth quarter.
Fox Corp Class A stock declined 0.7% to $33.75 after the company agreed to pay $787.50 million to settle a lawsuit brought by Dominion Voting System and avoided a 6-week trial.
Dominion had asked for $1.6 billion in damages but settled for a smaller amount after Fox News and its cable affiliates repeatedly aired false claims that the voting machine maker had helped rig the 2020 presidential election in favor of Joe Biden against Donald Trump.
Morgan Stanley declined 3% to $87.0 after the financial services provider said first quarter revenue and earnings fell.
Revenue in the first quarter decreased to $14.5 billion from $14.8 billion and net income dropped to $3.0 billion from $3.7 billion and diluted earnings per share eased to $1.70 from $2.02 a year ago.
Revenue in the institutional securities segment decreased to $6.7 billion from $7.8 billion, wealth management increased to $6.5 billion from $5.9 billion and investment management declined to $1.28 billion from $1.33 billion a year ago.
Assets under management dropped to $1.34 trillion from $1.44 trillion a year ago.
Nasdaq, Inc increased 3.2% to $57.43 after the stock exchanges operator reported revenue in the first quarter increased 2% to $914 million and net income rose to $302 million from $284 million and diluted earnings per share advanced to 61 cents from 57 cents a year ago.
The company repurchased $159 million in shares of its common stock during the first quarter of 2023 and as of the end of the first quarter there was $491 million still available for repurchase.
The company returned $257 million to shareholders in the first quarter, including $159 million in share repurchases and $98 million in dividends.
Nasdaq increased its quarterly dividend by 10% to 22 cents payable on June 30 to shareholders of record at the close of business on June 16.
Netflix Inc declined 1.8% to $327.59 after the video streaming services provider reported better-than-expected earnings in the first quarter but offered weak second quarter outlook.
Netflix said revenue in the first quarter increased 3.7% to $8.16 billion and net income fell to $1.3 billion from $1.6 billion and diluted earnings per share decreased to $2.88 from $3.53 a year ago.
Total global streaming paid members increased 4.9% to 232.50 million and paid members in the U.S. and Canada were stable at 74.4 million with average revenue per membership up 9% to $16.18.
Revenue in the U.S. and Canada rose 8%, in Europe, Middle East and Africa fell 2%, Latin America increased 7% and Asia Pacific added 2%.
The company forecasted second quarter revenue to increase 3% to $8.2 billion.
Tesla Inc decreased 2.2% to $180.25 after the electric vehicle maker lowered prices on some of its models for the sixth time this year.
Tesla is scheduled to release first quarter earnings after the close today.
Zions Bancorporation advanced 4.1% to $31.67 ahead of the regional bank's earnings release.
U.S. Indexes Turn Lower After Rate Path Worries Resurfaced
Barry Adams
19 Apr, 2023
New York City
Stocks in early trading turned lower as investors awaited a fresh batch of earnings and debated future rate path and terminal rate levels.
Despite the rising rates and growing anxieties related to elevated inflation, large banks and financial services are reporting steady sales and above-normal profits.
The Federal Reserve has lifted rates nine times in the last thirteen years, but banks have still not raised rates on deposits but have immediately passed on higher rates to borrowers.
Wage gains are not driving the current inflation as wage increases are lagging overall inflation.
Current drivers of inflation are fuel prices, housing market and above inflation price increases carried out by corporations.
Manufactured goods price increase and service inflation were the main drivers of profit for the last five quarters, the trend reflected in the latest quarterly results.
Home Affordability and High Rates Dampens Demand for Mortgages
Mortgage applications in the week ending on April 14 declined after rates rose and buyers struggled with elevated home prices, the Mortgage Bankers Association reported Wednesday.
Mortgage applications fell 8.8% reversing the gain of 5.3% in the previous week.
The average contract rate for 30-year fixed-rate mortgage, for loan balances less than $726,000, increased to 6.43%.
Home purchase mortgage applications dropped 10% and refinance applications declined 5.8%.
“Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act,” MBA's chief economist Joel Kan noted in the weekly release.
Indexes & Yields
The S&P 500 index declined 0.2% to 4,146.0 and the Nasdaq Composite index dropped 0.4% to 12,109.95.
The yield on 2-year treasury notes rose to 4.26%, 10-year treasury notes advanced to 3.62% and 30-year treasury bonds to 3.81%.
Crude oil fell $1.75 to $79.10 a barrel and natural gas futures hovered at $2.33 a thermal unit.
U.S. Stock Movers
Tesla Inc decreased 2.2% to $180.25 after the electric vehicle maker lowered prices on some of its models for the sixth time this year.
Netflix Inc declined 1.8% to $327.59 after the video streaming services provider reported better-than-expected earnings in the first quarter but offered weak second quarter outlook.
Morgan Stanley declined 3% to $87.0 after the financial services provider said first quarter revenue and earnings fell.
Revenue in the first quarter decreased to $14.5 billion from $14.8 billion and net income dropped to $3.0 billion from $3.7 billion and diluted earnings per share eased to $1.70 from $2.02 a year ago.
Revenue in the institutional securities segment decreased to $6.7 billion from $7.8 billion, wealth management increased to $6.5 billion from $5.9 billion and investment management declined to $1.28 billion from $1.33 billion a year ago.
Assets under management dropped to $1.34 trillion from $1.44 trillion a year ago.
Fox Corp Class A stock declined 0.7% to $33.75 after the company agreed to pay $787.50 million to settle a lawsuit brought by Dominion Voting System and avoided a 6-week trial.
Dominion had asked for $1.6 billion in damages but settled for a smaller amount after Fox News and its cable affiliates repeatedly aired false claims that the voting machine maker had helped rig the 2020 presidential election in favor of Joe Biden against Donald Trump.
European Markets Paused After Core Inflation Stayed Near Record Levels
Bridgette Randall
19 Apr, 2023
Frankfurt
European markets paused but stayed near the record territory as rate path worries resurfaced.
The latest reading on consumer price inflation, showed the stubborn nature of inflation forces, as the headline inflation stayed above 10.0% and core inflation hovered near the record level reached six months ago.
After the inflation data, traders forecasted another 25 basis points increase in UK's interest rates after the policy meeting on May 11.
But investors are still divided on the next moves from the U.S. Federal Reserve. Most investors are anticipating a rate hike of 25 basis points on May 3rd, but the rate path is uncertain after.
Markets anticipating that the Fed may pause after the rate hike in May but terminal rates may rise to as high as 5.75%.
On the earnings front, Heineken reported larger-than-expected decline in beer sales in the first quarter but reaffirmed its annual earnings outlook.
ASML Holding, the Netherlands-based semiconductor chip equipment maker, reported better-than-expected earnings.
Euro Area Core Inflation Accelerated In March
The Euro Area consumer price inflation eased for the fifth month in a row, Eurostat reported Wednesday.
The annual rate of price increase in March slowed to 6.9%, the lowest level since February 2022 and significantly lower than the peak rate of 10.6% in October.
Despite the decline in overall rate of inflation, core inflation which excludes food and energy, accelerated to record high 5.7%.
The rise in core rate put the stock market on alert and raised the prospect of the European Central Bank continuing its aggressive rate hike policy.
Service inflation accelerated to 5.1% from 4.8% in February and food, alcohol and tobacco inflation expanded to 15.5% from 15.0% respectively.
Energy prices declined 0.9% in March, first month of price decline in two years.
UK Consumer Inflation Stays Above 10%
The consumer price inflation rate eased to 10.1% in March from 10.4% in February, the Office for National Statistics reported Wednesday.
The consumer price inflation remained above 10% for the seventh month in a row and well above the 2% target set by the Bank of England.
Inflation was driven by price increases in food and elevated cost of energy utilities and housing.
Food and non-alcoholic beverage inflation accelerated to 19.1% from 18.0% in February and housing and utilities inflation eased slightly to 26.1% from 26.6% in the previous month.
Core rate of inflation, which excludes food and energy, rose 6.2% in March, slightly lower than the peak rate of 6.5% in September 2022.
Indexes & Yields
The DAX index decreased 0.1% to 15,862.75, the CAC-40 index declined 4.75 points to 7,528.83 and the FTSE 100 index decreased 0.3% to 7,883.07.
The yield on 10-year German Bunds rose to 2.52%, French bonds crossed 3.0%, the UK Gilts increased to 3.84% and Italian bonds to 4.35%.
The euro traded at $1.095, the British pound at $1.243 and the Swiss franc at 89.83 cents.
Brent crude oil declined $1.33 to $83.33 a barrel and the Dutch TTF natural gas hovered at Є42.70 per MWh.
Europe Stock Movers
Resource stocks were on the defensive after commodities prices eased a day after China optimism lifted prices.
Glencore Plc fell 0.9% to 493.30 pence, Anglo American plc declined 2.2% to 2,739.0 pence and BHP Group Limited decreased 0.8% to 2,520.50 pence.
Heineken Holding NV increased 1.7% to €87.50 after the company reported first quarter sales increased 9.2% to €6.4 billion.
Heineken brand beer volume rose 2.3% but overall organic beer volume declined 3% to 54.8 mhl.
ASML Holding NV decreased 2.4% to €574.70 after the advanced semiconductor equipment maker said revenue in the first quarter increased to €6.7 billion from €6.4 billion a year ago.
Net income in the first quarter increased to €1.95 billion from €1.81 billion and diluted earnings per share rose €4.96 from €4.60 a year ago.
Net booking in the quarter declined to €3.8 billion compared to €6.3 billion in the fourth quarter.
ASML forecasted second quarter 2023 net sales between €6.5 billion and €7.0 billion and a gross margin between 50% and 51%.