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JP Morgan Chase Kicks of the U.S. Earnings Season on a Strong Note

By:
David Becker
Published: Jul 14, 2017, 11:12 UTC

European stock markets are narrowly mixed, with the DAX and FTSE lower. Tapering concerns may have eased somewhat after Yellen failed to walk back her

U.S. Earnings Season

European stock markets are narrowly mixed, with the DAX and FTSE lower. Tapering concerns may have eased somewhat after Yellen failed to walk back her dovish comments from Wednesday at Thursday’s testimony, but markets remain nervous as both ECB and BoE are eying exit steps, with MacCafferty bringing the focus to the central bank’s guidance on QE. In Asia overnight, where the Nikkei closed 0.09% higher and the Hang Seng gained 0.16%, to end the week on a high note.

JPMorgan Chase, kicked off the U.S. earnings season, reporting Q2 earnings that beat on both the top and bottom line, as strong lending results offset declines in trading. Net profits came in at $1.82 versus $1.58 estimated. Revenue came in at $26.41 billion versus $24.96 billion estimated.

China June trade data beat expectations, with imports up 17.2% year over year, while the details showed that Chinese imports of iron ore, were on course to exceed 1 billion metric tons, which would surpass the 2016 record. In June, exports from the world’s second largest economy posted a 11.3% increase year over year, compared to expectations of a 8.7% increase. Import rose 17.2% in dollar terms, compared to expectations of a 13.1% rise. That left China with a trade balance of $42.77 billion for the month, higher than expectations of $42.44 billion. China had a $25.4 billion trade surplus with the United States in June, up from $22.0 billion in May. The surplus with the U.S. was China’s highest since October 2015, when it was $25.5 billion.

Japan’s Industrial Production Declined More than Expected

Japan’s industrial production declined more than expected in June, allowing the yen to gain traction, and giving a boost to the Nikkei according to the Ministry of Economy, Trade and Industry. Industrial output fell 3.6% month over month compared to a decline of 3.3%. Production advanced 6.5% year over year. The monthly decline in shipments was revised to 2.9% percent from 2.8% percent. Inventories remained stable, in contrast to the initially estimated 0.1% percent increase. The inventory ratio came in at -1.9%, unchanged from the initial estimate. The capacity utilization rate declined by adjusted 4.1% month over month in May.

U.S. CBO scoring of President Trump’s budget shows a shrinkage in the deficit outright and as a percentage of GDP growth. But, the CBO’s analysis does not show a balancing of the budget, in contrast to the small surplus seen by the Administration over the 10-year horizon. There are some big caveats, however. There’s insufficient specificity on healthcare, tax reform, infrastructure, and the postal service, for s tight analysis. Meanwhile, the Administration and the CBO are also using different economic forecasts, which have a big impact on growth results. The CBO estimates the budget shortfall would drop to $593 billion in 2018 from $693 billion for 2017, though the red ink would subsequently be on the rise through the new decade to total $720 billion in 2027. Measured as a percentage of GDP, the deficit for 2017 would slip to 2.6% by the end of the 10-year horizon, from 3.6%.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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