Bank Earnings, PPI, Draghi Threat, Celsius Bankruptcy - What's Moving Markets

© Reuters.

By Geoffrey Smith 

Investing.com -- JPMorgan gets the second quarter earnings season into gear, while producer price inflation data and jobless claims numbers will add to Wednesday's inflation drama. Stocks are set to open lower, although earnings overnight from sector bellwethers Uniqlo and Taiwan Semiconductor were better than expected. Italy's stocks and bonds fall as Mario Draghi threatens to quit as Prime Minister, and Celsius Network finally files for bankruptcy protection. Here's what you need to know in financial markets on Thursday, 14th July.

1. Bank earnings season begins

Earnings season gets underway in earnest in the U.S. with the release of JPMorgan’s (NYSE:JPM) results. There’ll be a lot to unpack in the statement from the U.S.’s biggest bank, usually a bellwether for the fortunes of the broader economy.

Investors will be looking to see how far CEO Jamie Dimon’s apocalyptic warnings for the world economy translate into fresh provisions and actual write-downs against bad loans. However, the bank’s trading results may muddy the waters, depending on how well it has navigated an unusually volatile quarter. Analysts expect earnings to have fallen some 23% from last year to $2.94 a share.

Also reporting later will be Morgan Stanley (NYSE:MS), which doesn’t have the same kind of Main Street loan portfolio.  

2. PPI to add twist to inflation narrative

More economic data could add to – or maybe cool – the speculation about further interest rate rises from the Federal Reserve.

Wednesday’s 41-year high of 9.1% in the CPI has put market participants on alert for a possible 1 percent raise in the fed funds rate when it meets at the end of the month, a fear stoked by the Bank of Canada’s decision to go for a full point hike only hours after the U.S. numbers.

The producer price index is expected to have risen another 0.8% in June, suggesting no let-up in pipeline inflation pressure even if the annual rate should tick down due to base effects. Weekly jobless claims will show whether the labor market is cooling off, or whether those losing their jobs are still simply sailing straight into new ones.  Both are due at 8:30 AM ET.

3. Stocks set to open lower despite strong overnight reports 

U.S. stock markets are set to open lower again, after holding up surprisingly well in the face of another shocking inflation report on Tuesday. JPMorgan’s earnings and the economic data have a big influence on the actual opening level, however.

By 6:20 AM ET, Dow Jones futures were down 316 points, of 1.0%, while S&P 500 futures were down 1.1%, and Nasdaq 100 futures were down 0.9%.

Overnight, there were better-than-expected earnings from Uniqlo owner Fast Retailing (TYO:9983) and from Taiwan Semiconductor (NYSE:TSM), the world’s largest contract silicon chip manufacturer. Swedish telecoms network equipment maker Ericsson (BS:ERICAs) disappointed, however.

Other stocks likely to be in focus later include Netflix (NASDAQ:NFLX) and Microsoft (NASDAQ:MSFT) after the news of their partnering in putting ads on some of the streaming giant’s content.

4. Italian yields jump as Draghi faces key confidence vote                                       

Europe’s energy crisis is snowballing into an economic one and, in some places, a political one too.

Italian bond yields surged and the FTSE MIB plunged as Prime Minister Mario Draghi threatened to quit if the 5 Stars Movement (M5S) abandons his coalition government. Draghi’s presence at the top of Italian politics has been a calming factor for markets while first the pandemic then the Ukraine war buffeted an economy troubled by high debt and chronically low growth. Then there’s the threat of higher interest rates from the European Central Bank, which is set to squeeze public finances even harder.

M5S is set to abstain in a vote of confidence in the government which takes place in the Senate from 8 AM ET. Draghi has threatened to resign if it does. If he does, then the ball will once again be in the court of ageing president Sergio Mattarella.

5. Celsius Network files for bankruptcy protection

Celsius Network, one of the world’s biggest cryptocurrency lenders, succumbed to the inevitable and filed for bankruptcy protection, unable to recover loans to the collapsed hedge fund 3 Arrows Capital.  

The news puts Celsius’ 1.7 million users, who have nothing comparable to the deposit insurance enjoyed by clients of regulated banks, in a poor position to recover any of their money.

Celsius is the highest profile casualty of the selloff in crypto to date. Celsius’ own native token, already effectively worthless, fell 18% as a speculative short squeeze unwound. More established crypto assets were broadly unchanged, however, with Bitcoin trading flat at $19,798 and Ethereum up 1.5% at $1,087.