US bank earnings

Financials have been at the front of the Trump rally and this week we’ll get a much clearer idea of whether they can justify their lofty valuations.

The S&P 500 financials sector has the star performer since last November, rising nearly 25% in the last six months on the prospect of rising interest rates and looser regulation boosting earnings. Banks have been key to the stock market’s gains, particularly as they have an outsized effect on the Dow Jones industrial average.

But US earnings expectations, although high, are beginning to be revised down. At the same time there are fresh doubts about whether President Trump will succeed with his deregulation agenda.

Financials kick off the start of Q1 earnings season proper on Thursday, with Citigroup, Wells Fargo and JPMorgan Chase all set to report.

wall street trading

UK inflation

Kristin Forbes was the lone hawk among the doves at the last Bank of England meeting, voting for a rate hike largely because inflation is really starting to take off. Her view to some extent was vindicated when inflation was shown to have jumped to 2.3% in February from 1.8% in January. On Tuesday we get the figures for March and they could be key to understanding just how close other members of the MPC are to raising rates when they convene again in May.

Expectations that the Bank of England might be nearer to raising rates than previously thought has kept a floor under sterling despite fears about Brexit and a faster acceleration in inflation could see it strike a more hawkish tone. Governor Mark Carney has made it clear that tolerance for inflation overshooting is limited.

Tesco final results

Britain’s biggest retailer is enjoying the fruits of a turnaround but a proposed tie-up with Booker has got some investors a little nervous. But six straight periods of sales growth came to a juddering halt at the start of the year, highlighting just how tough the UK retail market is right now. A weak pound, faltering consumer spending and rising wage costs are keeping the pressure on.

We will learn a lot more about just what shape Tesco is in when it releases full-year results on Wednesday. Look for an update on the Booker deal and whether a shareholder revolt is mere bluster or something rather more substantive.

US inflation

Markets should be quiet on Friday as the Easter weekend gets underway but that it’s business as usual in the US and the release of monthly inflation figures. Just as in the UK, this release will be a deciding factor in the Federal Reserve’s assessment of monetary policy at its next meeting, and therefore likely to move bond yields and the US dollar. Strengthening in prices has been key to the Fed’s hawkish pivot as it looks to raise rates three times this year. At 2.7%, CPI is running at a five-year high as reflation sets in.

Source: ETX Capital

See full list of spread betting companies