The Week Ahead: US Beige Book; JPMorgan, JD Sports, Rio Tinto Results

Watch our week ahead video preview, read our pick of the top stories to look out for this week (13-17 April), and view our key company earnings schedule.

In this week's video UK chief market analyst, Michael Hewson, looks back at last week's moves in equity markets, the prospect of further gains, and looks ahead to China GDP and trade balance, plus the US Beige Book, jobless claims and bank earnings. He also looks at key levels for the FTSE 100, DAX and S&P 500, as well as Brent crude oil and gold.

China trade balance (March)

Tuesday: Exports plunged by 17.2% in February’s China trade balance reading, with the country locked down over Chinese New Year as the authorities battled the coronavirus outbreak. Imports were slightly better, only declining 4% against an expectation of a 15% fall, with this outperformance put down to a rise in soybean imports, which showed a 14.2% jump in the first two months of the year. As we moved into March, there was an improvement in some data, with the purchasing managers’ indices rebounding strongly as factories started to reopen. This should be reflected in the March trade numbers, though any improvements are likely to be more on the domestic side, than internationally. As Chinese economic activity begins to pick up, other regions are about to go through what China experienced in February, so demand for Chinese exports is likely to remain weak as consumers stay at home.

US banks:JPMorgan Chase, Citigroup Citigroup & Wells Fargo (NYSE:Wells Fargo Q1 results

Tuesday & Wednesday: One of the main characteristics for US bank earnings in recent quarters is how often they have beaten expectations. JPMorgan Chase, in particular, has been a decent bellwether, having posted record revenue and profit in successive quarters over the past year. In January, the bank posted revenue of $29.2bn, a record for Q4, with decent gains across all of its business areas. Q4 profit came in at $8.52bn, and while recent volatility is likely to have boosted its investment banking division in Q1, an expected slowdown in the retail bank is likely to hit revenue in the area of home loans, autos and credit cards. With this in mind, this week’s results from the likes of JPMorgan, Citigroup, Morgan Stanley (NYSE:MS) and Wells Fargo could come in at the lower end of expectations. Goldman Sachs (NYSE:GS) may outperform given its lack of retail exposure and the fact that its investment banking margins tend to be better. Wells Fargo is likely to be the most exposed after underperforming at the end of Q4, due to various legal challenges, while the sharp decline in the US economy in the last four weeks is likely to hit the bank hard given its largely domestic focus.

Countrywide full-year results

Wednesday: Countrywide’s results have been delayed due to the recent turbulence in the UK economy. The housing sector is one of many industries that is set to see significant disruption from the ongoing lockdown. The share price has been battered since the end of January, losing over 80% of its value. The downward spiral wasn’t helped by Your Move owner, LSL Property Services, pulling out of its talks to take over the troubled estate agent, or the departure of its new CEO, Bruce Marsh, before he had even joined. With banks pulling a range of mortgage products as a result of the disruption, the government stepped in to suspend the housing market. For a sector that is already finding life difficult due to slowing sales, the upcoming recession could signal the final straw for a lot of the smaller players in the division.

US Beige Book (March)

Wednesday: The latest Beige Book survey of economic conditions is likely to paint a horrific picture of a US economy in a self-induced coma. The widespread job losses, as well as a decline in business confidence, is likely to resonate for a while as the infection rate and death toll rises with the virus sweeping across the country.

JD Sports full-year results

Wednesday: JD Sports had up until the end of last year been one of the best performing retail stocks of 2019. The business was also in the process of acquiring Footasylum, albeit the acquisition was being investigated by the Competition and Markets Authority, with the regulator arguing that the acquisition was anti-competitive and would limit choice. Putting to one side that Footasylum only accounts for 5% of the retail market, recent events with respect to coronavirus have made these concerns somewhat redundant. Since mid-February, all of the 2019 gains have gone up in smoke, while in March management took the decision to close all of its stores in the UK, Europe and the US, though online sales remain open. The suspension of business rates will help cushion some of the effects of this government-enforced lockdown, with management suspending future guidance until further notice. Wednesday’s full-year numbers are expected to show revenue of £5.96bn and a gross profit of £2.8bn, numbers that will be hugely difficult to replicate in the weeks and months ahead.

Bank of Canada interest-rate meeting

Wednesday: At the end of last month the Bank of Canada surprised the market by unexpectedly cutting interest rates for the third time in a matter of weeks, to a record low of 0.25%, as policymakers took steps to protect the Canadian economy from the effects of coronavirus and the sudden collapse in the oil price. A rise in jobless claims to over a million also saw the central bank pledge to buy up to $5bn of government securities per week, as the Bank of Canada became the latest in a long line of central banks to go down the QE route. The latest non-farm payrolls report was a shocker, justifying the Bank’s recent response. Wednesday’s rate meeting is expected to reiterate the Bank’s determination to support the economy, while we could see further indications that it might take further QE measures to support the economy. Governor Poloz didn’t rule out the use of negative rates at his most recent press conference, however it seems unlikely that the central bank would move its headline rate much lower, given the experience of European banks and how negative rates have crippled a lot of them.

US weekly jobless claims

Thursday: Another big number here is likely to act as the final piece of the puzzle when it comes to the next US non-farm payrolls report. After three successive weeks of multi-million claim returns, the April jobs report is expected to be eye-wateringly bad, easily beating the record high last month where 701,000 people lost their jobs. It could also prompt calls for further fiscal stimulus measures to cushion the effects of a sharp rise in the unemployment rate, which is above the worst levels 12 years ago at the height of the financial crisis.

Rito Tinto

Thursday: When Rio Tinto updated the markets back in February, the company’s net profit had declined 41% after writing down the value of its assets in Mongolia and Australia, with profit coming in at $8bn. Before these one-off items, profit was higher to the tune of $18bn, largely helped by improvements in its iron ore operations at Pilbara. Thursday’s Q1 update is likely to be marked by disruptions caused by the shutdown of the Chinese economy for most of February, along with the slowdown and virtual stopping of the global economy for the remainder of the quarter. Now that China is starting to restart its economy, demand for iron ore could pick up, but there is no question that Q1 revenue is likely to decline for Rio Tinto decline in line with the global slowdown. This could impact on potential dividend payments if the global economy continues to struggle in the weeks ahead.

China gross domestic product (Q1)

Friday: This week’s China GDP data is expected to show the Chinese economy contracted sharply in Q1, as economic activity across the region stopped for the whole of February. The only unknown remains the extent of the economic contraction, as well as the longer-term impact to the Chinese government’s ambitions of hitting its 6% GDP target for the year.

Selected UK & US company announcements

Company announcements are subject to change. All the events listed above were correct at the time of writing.

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