Morning Bid Americas: Banks calm the horses

Prometheus Biosciences

17/04/2023 11:00

A look at the day ahead in U.S. and global markets from Mike
Dolan.
As U.S. banking giants calm the horses, global investors are now
concentrated on world growth and earnings signals more than
interest rate rises for direction - with an assumption the
latter are near an end anyway.
    Sending its stock price surging 7.5% for its biggest daily
gain in more than two years and best results-day jump in 20
years, JPMorgan  JPM.N  on Friday led other U.S. banking giants
in brushing off the March regional bank crisis with
first-quarter profit beats that showed larger banks winning out.
    Somewhat relieved analysts marginally brightened their dim
outlook for first-quarter U.S. results compared with a week ago.
    Although on aggregate S&P500 earnings are still on course
for their second straight quarterly contraction, consensus
forecasts for Q1 were pared back to a 4.8% decline from a year
ago versus a 5.2% drop a year earlier.
    State Street and Charles Schwab on Monday kick off a busy
earnings week for more big banking names as well as readouts
from the likes of Netflix, IBM and Tesla.
    With the U.S. diary pretty thin on Monday, attention shifts
to Tuesday's monthly data dump in China - where first quarter
GDP is forecast to have accelerated to an annual 4.0% from 2.9%
in the final three months of last year and retail and industrial
numbers are expected to have sped up in March too.
    Given last week's report of a blowout March for Chinese
exports and imports, the risk to those numbers may well be to
the upside.
    And so with the banking stress ebbing and world growth
picture holding up impressively so far - despite the mixed
picture stateside - interest rate markets seem confident in
pricing one final hike from the Federal Reserve next month.
    Futures markets now see a more than 80% chance the Fed will
execute one final quarter point rate rise next month - reversing
it by September. That rate rise would bring the real Fed policy
rate - adjusted by headline consumer price inflation - into
positive territory for the first time in three years.
    Two-year Treasury yield clung to 4% meantime.
    But stocks seem relaxed with the whole prospect, the VIX
volatility gauge  .VIX  closing at its lowest on Friday since
January 2022 and Treasury volatility  .MOVE  back down to
February levels. 
    Asia bourses were up smartly and Europe more mixed, Wall St
futures were higher going into the open. The dollar  .DXY 
extended Friday's rebound as the May rate rise pricing hardened.
    With three-month Treasury bill rates elevated due to
simmering U.S. debt ceiling concerns that are due to come to a
boil this summer, there was background trepidation.
    Geopolitical tensions between the United States and China
also rankle. The U.S. warship USS Milius sailed through the
Taiwan Strait on Sunday, in what the U.S. Navy described on
Monday as a "routine" transit, just days after China ended its
latest war games around the island.
    In a sign of how the deterioration in relations between the
two superpowers is starting to affect corporate planning, there
was interest in a Financial Times report that said one of
China's biggest water-heater manufacturers Vanward New Electric
claimed its U.S. clients had demanded it move production out of
China in response to the rising tension.  
    It was a much better weekend in the world of mergers and
acquisitions.
    Merck  MRK.N  said on Sunday it will buy California-based
biotechnology firm Prometheus Biosciences  RXDX.O  for about
$10.8 billion, which at $200 per share represents a 75% premium
to the $114.01 closing price for Prometheus shares on Friday.
    Merck's move sees it pick up a promising experimental
treatment for ulcerative colitis and Crohn's disease and builds
its presence in immunology.
    Shares of Rovio  ROVIO.HE  rose 17.8% after Japan's Sega
 6460.T  agreed to launch a 706 million euro offer for Angry
Birds maker.  
    Elsewhere in banking, the BOE is considering a major
overhaul of its deposit guarantee scheme, including boosting the
amount covered for businesses and forcing banks to pre-fund the
system to a greater extent to ensure faster access to cash when
a lender collapses, the FT reported on Sunday.
    
Key developments that may provide direction to U.S. markets
later on Monday:
* U.S. April NAHB housing market index, NY Fed April
manufacturing survey, Feb TIC data on Treasury holdings 
* Richmond Federal Reserve President Thomas Barkin speaks, Bank
of England Deputy Governor Jon Cunliffe speaks
* U.S. corporate earnings: State Street, Charles Schwab, M&T
Bank, JB Hunt Transport

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
JPMorgan eclipses rivals with Q1 deposits growth    https://tmsnrt.rs/3mzWCQQ
Deposits to loans in U.S. banking system    https://tmsnrt.rs/3zVsPoR
China's slow recovery    https://tmsnrt.rs/3KX5Y2i
U.S./China Tech R&D gap    https://tmsnrt.rs/3lNNHuQ
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, mike.dolan@thomsonreuters.com. Twitter:
@reutersMikeD. Editing by Ed Osmond)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))