England lockdown eases
Non-essential shops and services including hairdressers and gyms are due to welcome back customers on Monday after a third lockdown in England.
Public buildings, such as libraries, will also reopen, and outdoor hospitality venues, such as pub gardens, and outdoor entertainment venues, including zoos and theme parks, will also be allowed to reopen.
Elsewhere . . .
Lloyd Austin, US defence secretary, is scheduled to make his inaugural visit to Germany on Tuesday, when he will meet counterpart Annegret Kramp-Karrenbauer as part of a European tour which also takes him to Israel, Nato’s headquarters and the UK.
Cuba’s last Castro is set to leave the political stage on Friday when Fidel’s 89-year-old brother Raúl is expected to cede power to a younger generation at the start of the country’s Communist party congress. Cuba faces challenges from Covid-19, a worsening economic crisis and growing political dissent.
Trading revenues at JPMorgan Chase and Citigroup will be watched closely when the two US lenders report this week. The US banks have recently delivered the fourth consecutive quarter of blowout trading results, which has tempered fears that Wall Street’s boom was running out of steam.
In the last quarter, JPMorgan reported a 20 per cent increase in trading revenues year on year, led by a 32 per cent jump in revenues from stock trading.
Citi’s stock trading revenues were up 57 per cent on the same basis, while its total revenues from trading stocks, bonds and derivatives were up 14 per cent.
The strong quarter capped off a bumper year for Wall Street as the volatility inspired by the coronavirus pandemic — and central bank actions designed to ease the economic impact — led to extraordinary market conditions.
Senior executives at JPMorgan and Citi both stressed in January that the tide would eventually turn, while also noting the healthy pipeline of investment banking deals and strong markets outlook in the short term, fuelled by stimulus and Federal Reserve interventions.
Goldman Sachs was also a beneficiary of a trading and investment banking bonanza in the fourth quarter, but will 2021 results reach the same peaks?
Goldman in January posted net income of $4.5bn for the final three months of 2020, up 135 per cent year on year. Revenue rose 18 per cent to $11.7bn, the highest ever for a fourth quarter
Meanwhile, revenues coming from the advisory unit in its investment banking division are also to watch after a flurry of stock market listings and a rebound in mergers and acquisitions in the second half of 2020 heralded big paydays for the sector.
Strong markets and investing activity is set to boost capital markets revenues for Bank of America this week. In the fourth quarter, capital markets revenues rose 7 per cent, led by a 30 per cent increase in equity trading revenue, compared with the fourth quarter the year before. Fixed income revenue fell 5 per cent. The trading results, however, were not as strong as JPMorgan or Citi.
The investment bank division is also an important source of revenues for Morgan Stanley, which last quarter benefited from the unit’s standout performance, with sales and trading revenues rising 32 per cent year on year, as clients repositioned their portfolios amid market volatility during the pandemic.
Wealth management, which Morgan Stanley is expanding through the acquisition of ETrade, increased revenues by 24 per cent year on year, to $5.7bn. That division’s net profits fell 5 per cent year on year, as it absorbed the cost of integrating ETrade. This quarter, industry figures will be looking at how well the integration is going.
“Our firm is at an inflection point and the next decade will be characterised by growth,” said James Gorman, chief executive of Morgan Stanley.
Wells Fargo, which has recently agreed to sell its asset management arm to US private equity firms GTCR and Reverence Capital Partners for $2.1bn, is also reporting this week.
The deal comes as the bank has pledged to cut $8bn from its annual cost base over the next three years, including more than 250 “efficiency initiatives” by streamlining operations around its most core businesses.
Wells Fargo has struggled to recover from a 2016 mis-selling scandal and continues to operate under a balance-sheet cap imposed by regulators as a punishment.
Outside the US banking sector, results from UK supermarket Tesco and luxury brand owner LVMH are ones to watch this week.
JD Sports Fashion; LVMH
JPMorgan Chase; Wells Fargo; Goldman Sachs; Tesco
Bank of America; PepsiCo; Citigroup; Charles Schwab; BlackRock; US Bancorp; Oxford BioMedica
Honeywell; Morgan Stanley; Bank of New York Mellon
Economic data and central banks
One of the key releases this week is US retail data, an important gauge for the strength of the country’s consumers, whose spending makes up about two-thirds of total US economic output.
Investors will find out on Thursday whether another round of stimulus payments that reached American households in March sent sales jumping again after they fell in February.
Analysts are confident that they will bounce back. Economists surveyed by Bloomberg are expecting a 5.9 per cent rise in month-on-month retail sales, with all respondents expecting at least a 3.5 per cent increase.
In February, sales volumes fell 3 per cent, as a “polar vortex” shut down parts of the country and American households waited for their follow-on stimulus payments. The decline followed a strong consumer showing in January, when retail sales were up by a revised 7.6 per cent from December after several sluggish months.
Elsewhere, Germany’s economic prospects have been deteriorating since the start of the year as a persistently high number of coronavirus infections and a slow vaccine rollout have led to an extended lockdown.
Services in Germany have been the hardest hit by the lockdowns, with the reversal of the value added tax reduction at the start of this year also having hit consumption.
However, the closely watched Zew survey of financial market experts, out on Tuesday, is expected to show a strengthening in their assessment of the German economy to 79.5 in April from 76 in the previous month, according to analysts polled by Bloomberg.
Economists polled by Bloomberg expect a report released on Friday to show China’s economy has expanded 18.6 per cent in the first quarter of this year compared with the same period in 2020.
A year on from the start of the pandemic China’s growth reflects the country’s far speedier recovery from the effects of coronavirus compared with other big economies.
By the fourth quarter of last year, its economy, fuelled by rapid industrial expansion, booming exports and low levels of infections, was growing at a faster pace than before the pandemic emerged.
Now, the focus in China has shifted to the prospect of rate rises because of concerns about overheating in parts of its economy, especially the property sector. Investors will be closely watching this week’s gross domestic product data release for any hints of when policy might shift.
The UK has February GDP data on Tuesday, but growth is unlikely to rise enough to cancel the previous month’s 2.9 per cent drop.
Trade data are out the same day and will be closely watched to see if January’s figures were a post-Brexit blip, when exports to the EU fell more than 40 per cent in January and imports were down 30 per cent.
It is a quiet week again on the central bank front with Turkey the main point of interest, where a rate cut from new central bank governor Sahap Kavcioglu is possible, but by no means a foregone conclusion.
Key data and events
India, CPI (Mar)
UK, monthly GDP, trade balance (Feb)
Germany, Zew survey (Apr)
US, CPI (Mar)
China, trade data (Mar)
Japan, core machine orders (Feb)
Eurozone, industrial production (Feb)
New Zealand, rate decision
Germany; France; Poland, CPI (Mar)
US, Initial jobless claims
US, retail sales advance (Mar)
US, Philadelphia Fed business outlook (Apr)
US, industrial production (Mar)
Turkey, rate decision
China, GDP (Q1)
China, fixed assets ex rural, retail sales, industrial production (Mar)
Eurozone, HICP (Mar)
Canada, housing starts (Mar)
US, housing starts (Mar)
US, University of Michigan sentiment (Apr, flash)