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Bank Earnings, June CPI and IEA Warns OPEC - What's Moving Markets

EconomyJul 13, 2021 19:00
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By Geoffrey Smith -- Earnings season kicks off in earnest with updates from JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and Pepsi. The International Energy Agency warns of a severe tightening of global oil markets if OPEC doesn't resolve its current standoff, and U.S. inflation is expected to have eased in June from a peak of 5.0% in May. Here's what you need to know in financial markets on Tuesday, July 13th. 

1. As good as it gets?

Second-quarter earnings season kicks into gear with the release of quarterly updates from JPMorgan and Goldman Sachs. The figures are likely to benefit from the rise in bond yields in the period that will have padded their lending margins. Sustained equity market strength and bond market volatility may also have helped revenues.

However, much of the bond volatility has reversed in recent weeks as investors have pared bets about the reopening process and higher interest rates have started to cool the mortgage lending market. Investors will be on the lookout for any signs in the two banks’ guidance that this is as good as things are likely to get.

Also reporting before the start of trading are PepsiCo , Fastenal and Conagra.

2. U.S. CPI may peak; Bullard warns on housing bubble

The day’s big data release is the U.S. consumer price index for June, which is expected to show annual inflation easing moderately from May’s 5.0%, a number that was heavily influenced by the surge in second-hand car prices, and by the collapse of oil prices to zero in the spring of 2020. 

Paul Donovan, chief economist with UBS Global Wealth Management, argued in a morning note that the CPI would be closer to 1.5% when adjusted for such factors. 

Even so, the debate over whether the Federal Reserve should tighten monetary policy is increasingly being played out in the media. St. Louis Fed President James Bullard told The Wall Street Journal in an interview published earlier Tuesday that it’s already time to start reducing asset purchases, given their role in fuelling what looks like a housing bubble. New York Fed President John Williams had taken the other side of the argument in a speech on Monday.

3. Stocks set to open mixed; J&J in focus after FDA alert

U.S. stock markets were treading water ahead of the keenly-awaited bank earnings, which are often taken as a proxy for the health of the economy in general.

By 6:15 AM ET (1015 GMT), Dow Jones futures were down 28 points, or less than 0.1%, while S&P 500 futures were also flat and Nasdaq 100 futures up a modest 0.3%.

In addition to the companies reporting, attention is likely to fall on Johnson & Johnson (NYSE:JNJ), after the Food and Drug Administration warned of a possible link between its Covid-19 vaccine and a rare neurological disorder, and on Alphabet (NASDAQ:GOOGL), after France fined it nearly $600 million for failing to agree compensation to the nation’s publishers for carrying their news.

4. France ratchets up vaccination pressure ahead of peak tourist season

France significantly ramped up pressure on its population to accept vaccination, in an attempt to slow transmission of the delta variant of Covid-19 in the country.

President Emmanuel Macron warned on Monday that people will have to show proof of vaccination or naturally-acquired immunity for entry to cafes, restaurants, cinemas and other venues. They’ll have to do the same if they want to board a plane or a long-distance train, under new measures announced by Macron.

Meanwhile on Tuesday, Health Minister Olivier Veran warned that vaccination will be made mandatory for health workers.

France is the world’s most popular tourist destination. However, the peak summer season is about to start at a time when the delta variant of Covid has already generated a clear upturn in case numbers.

5. Oil rises as IEA warns of increased tightness in global markets

Crude oil prices rose after the International Energy Agency warned that global energy markets will  “tighten significantly” if the so-called OPEC+ grouping doesn’t resolve its current dispute over allocating market share to its members

The Paris-based think-tank warned in its monthly report on Tuesday that the standoff threatens to exacerbate a “deepening supply deficit,” with “the potential for high fuel prices to stoke inflation and damage a fragile economic recovery.”

U.S. crude futures rose 0.6% to $74.51 a barrel, while Brent futures rose 0.6% to $75.60 a barrel.

The American Petroleum Institute is due to release its weekly estimate of U.S. crude stocks at 4:30 PM ET as usual.

Bank Earnings, June CPI and IEA Warns OPEC - What's Moving Markets

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