By Geoffrey Smith
Investing.com -- Wall Street kicks off earnings season, Blackrock (NYSE:) goes green and China's external trade bounced sharply at the end of last year. Plus Visa (NYSE:) spends $5.3 billion in an effort to stop being leapfrogged by new payments technologies. Here's what you need to know about in financial markets on Tuesday, 14th January.
1. Banks kick off earnings season.
The U.S. earnings season kicks off with a bang as JPMorgan Chase (NYSE:), Citigroup (NYSE:) and Wells Fargo (NYSE:) all report their results for the fourth quarter of 2019.
Of these, JPMorgan (NYSE:), the biggest and – in recent years – the most dynamic of Wall Street’s blue bloods, will be most closely watched, especially as its U.S. operations shed a light on the health of the broader economy.
Consensus estimates are for a 19% rise in earnings per share to $2.35, while revenue is expected to rise 4.3% to $27.96 billion. FactSet expects the bank’s net interest margin to be stable at 2.37%.
Citigroup’s EPS are expected to have risen 13% to $1.82, on a 4.5% increase in revenue to $17.89 billion.
Wells Fargo’s earnings are expected to have fallen to $1.12 a share from $1.21 a year ago.
2. Blackrock shakes up portfolio to address climate challenge
Blackrock (NYSE:), the world’s biggest portfolio investor, warned of a profound shift in the allocation of capital as investors wise up to the risks of climate change.
The company, which has been criticised for not using its market power to focus company boards more on sustainability issues, said in its annual letter to CEOs that it will double its offering of sustainability-focused ETFs to 150. It will also cut companies that derive a quarter or more of their revenues from thermal coal from its actively managed portfolios, aiming to raise its sustainable assets to $1 trillion over the next 10 years from $90 billion today.
“Companies, investors, and governments must prepare for a significant reallocation of capital,” CEO Larry Fink said in the letter.
3. China’s trade rebounds
China’s foreign trade rebounded well above expectations in December as companies rushed to beat the deadline for higher U.S. import tariffs. Exports came in 7.6% up on the year, while imports rose by an even more impressive 16.3%.
The rush to beat the tariff deadline suggests that exports could fall back sharply in January and February, when further distortions can be expected from the Chinese New Year celebrations. Even so, the figures point to further evidence of Chinese industrial activity bottoming out after successive U.S. tariff hikes.
The news comes a day ahead of the scheduled signing of the U.S.-China trade truce, which cancelled the December tariff increase and rolled back some others, while still leaving most existing import tariffs in place.
4. Stocks set to open slightly lower
U.S. stock markets are set to open a touch lower after hitting new record highs again on Monday in anticipation of the U.S.-China trade deal.
By 6:15 AM ET (1115 GMT), were down 61 points or 0.2%, while S&P 500 futures and the contract were both down 0.3%.
Stocks in Europe had earlier opened lower before largely erasing losses.
Various high-profile houses have warned that the markets may be getting ahead of themselves, given the late stage of the economic cycle and the narrowing scope for support from central banks. UBS Wealth Management, the world’s biggest wealth manager, added its voice to a growing chorus of caution on Tuesday, chief investment officer Mark Haefele telling a conference that “As central banks flood the markets with liquidity, that pulls forward a lot of your returns. That’s simply the way it is.”
On a day set to be dominated by corporate earnings, there’s only one data release of note – the U.S. CPI for December at 8:30 AM ET.
5. Visa pushes expansion beyond cards
Visa (NYSE:) said it would buy fintech startup Plaid Inc. for $5.3 billion, as part of its strategy of diversifying beyond its core card business and gain more exposure to consumers’ use of fintech apps.
Plaid offers software that gives financial technology apps access to customers’ bank accounts. Venmo the money-transfer service owned by PayPal, is one of Plaid’s biggest customers, according to the Wall Street Journal.
The acquisition reflects the need for Visa and Mastercard (NYSE:), two of the best-performing financial stocks of the last decade, to stay relevant as technology threatens to leapfrog the now-dominant card payment business.