US equities made modest progress this afternoon following earnings from JP Morgan that got the US bank earnings period off to a good start.
An increase in retail sales in March also lifted confidence, as investors returned to risky assets following several days of declines.
JP Morgan’s results have helped to improve the current earnings season, which began in less-than-stellar form earlier this week with Alcoa. The strong retail sales data buoyed the US dollar against other currencies, as investors began to move back into the US currency now that the effects of an improving jobs market is beginning to be seen.
US equities – JP Morgan kicks off bank earnings season
JP Morgan has set a high standard for other US banks to follow, announcing a 67% surge in earnings. First quarter net income was $5.56 billion, $1.28 per share, which comfortably beat the Bloomberg consensus forecast of $1.15 per share. Provisions for credit losses slumped 83% to $1.17 billion, indicating further improvement in the bank’s loan book. Losses in its mortgage business of $937 million were compensated for by a $1.3 billion profit in the credit card business. The news will be greeted with a sigh of relief, as it marks another stage on the road to recovery for the beleaguered US financial sector. JP Morgan shares edged up 0.3% to $46.79, while Goldman Sachs and Morgan Stanley rose 1%. Bank of America, which reports on 15 April, was mostly unchanged at $13.48.
By 3.30pm (London time), the Dow Jones had risen 35.87 points (0.29%) to 12299.45 and the S&P 500 was up 3.14 points (0.24%) to 1317.30.
US retail sales improve
US retail sales rose for the ninth consecutive month in March, as the slow improvement in the American employment market begins to feed through. Overall retail sales were 0.4% higher, after an upwardly-revised February figure of 1.1%. The March figure was just below the forecast 0.5%, but the figure excluding cars and petrol (or, as the Americans say, auto and gas) was ahead of expectations, at 0.6%. A gradual decline in unemployment and a cut in payroll taxes are helping to sustain sales across the country, with ten of 13 major categories showing growth. The electronics sector saw its largest advance in sales in over a year, and today’s news tallies well with last week’s industry report for the sector, which said that like-for-like sales rose 2.2% in March.
Business inventories rose 0.5% in February, to $1.46 trillion, their highest level since December 2008, but a smaller-than-forecast increase (a Reuters poll expected a 0.8% gain). The Commerce Department said that sales increased by 0.2% to $1.17 trillion, the highest level since August 2008, following a 2% jump in February. The inventory-to-sales ratio was unchanged at 1.24 months.
Mortgage applications drop back again
Mortgage applications fell for a third week in a row, as the demand for refinancing continued to ebb. The Mortgage Bankers Association reported a 6.7% drop in its seasonally-adjusted index for the week to 8 April, with applications at their lowest level since 21 January. Fixed 30-year mortgage rates continue to rise, to 4.98% from 4.93% in the previous week, making refinancing more expensive. This was reflected in a 7.7% slump in refinancing applications, which outdid the 4.7% fall in requests for home purchase loans.
UK afternoon – Fresnillo, Alterian
The FTSE 100 extended its gains into the afternoon, moving further above 6000, and by 3.30pm (London time) it was up 1% at 6024.19.
Mexican silver miner Fresnillo saw silver production drop back slightly in the first three months of 2011, due to a decline in ore grades. Output was down 2.2% to 10.1 million ounces, but gold production was boosted by 13.3% to 96,407 ounces, thanks to expanded capacity. The firm commented that it planned further expansion in production in the coming year, with a silver output target of 44 million ounces for 2011.
The saga at software firm Alterian took another turn today, as the firm said that it now expects revenue for the year to March 2011 to be even lower than that suggested in last week’s announcement. On 4 April, the firm said that revenue would be around 10% below expectations, which had been £42-44 million. The announcement also reported the departure of the chief executive. A further review of operations means that revenue will be lower still. A fuller statement will be released on 18 April, so watch out for part three in the Alterian trilogy then. The shares dropped by a third, to 110.3p, having stood at 189.75p the day before the first announcement.
US news flow later today
Later this evening, at 7pm (London time), the Fed’s informal Beige Book survey of the US economy will be published, and will provide an insight into the general state of the US economy. President Obama will unveil his own plan to cut the US deficit, in a bid to set out an alternative vision to Republican tax cuts. The plan is expected to include a reduction in defence spending and healthcare costs, as well as the closure of corporate tax loopholes.
