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LGT Navigator: Major US banks convince with quarterly earnings

October 15, 2021

Strong quarterly earnings boosted the mood on Wall Street on Thursday. Investors focused in particular on the results of the major American banks. Meanwhile, US producer prices rose sharply again in September, and experts are revising growth expectations for the German economy downward.

US bank earnings in focus

After strong earnings figures, US stock markets recorded the biggest jump since last March. The S&P 500 climbed on Thursday +1.7% to 4’438.26 points and the Dow Jones gained +1.6% (closing: 34’912.56 points). The Nasdaq Composite also advanced +1.7% to 14’823.43 points. Top performers were the shares of drugstore chain Walgreens Boots Alliance, which gained +7.4% after better-than-expected quarterly results. 

Asian stock markets are up on the last trading day of the week. In Tokyo, the Nikkei gains +1.4%. In Hong Kong, the Hang Seng +0.9% trades firmer and the Shanghai Composite gains +0.3%.

US banks exceed expectations

On Wall Street, the quarterly results of the major banks were in the spotlight on Thursday. The investment bank Morgan Stanley benefited in the third quarter from a high M&A activity and posted a jump in profits of +36% compared to the previous year, thereby significantly exceeding market expectations. Citigroup also boosted advisory fees from IPOs, mergers and acquisitions, increasing profits by around 50% year-on-year. The bank thus cushioned a decline in bond and equity trading. In addition, Citigroup dissolved reserves it had made last year for impending loan losses in connection with the corona pandemic. This was followed by its competitors Bank of America and Wells Fargo, which also performed better than expected.

The shares of Morgan Stanley (+2.5%), Citigroup (+0.8%) and Bank of America (+4.5%) reacted with price gains to the latest figures. In contrast, the shares of the largest US mortgage lender Wells Fargo recorded losses (-1.6%).

US producer prices rise

In the US, producer prices rose again in September. Thus, manufacturers increased prices by +8.6% compared to the same month last year, the Labor Department reported on Thursday in Washington. This is the strongest growth since the start of calculations in 2010. Analysts had expected an average increase of +8.7%. If the volatile energy and food prices are excluded, annual prices grew by +6.8%. Over the month, core producer prices rose by +0.2%, the weakest monthly increase in the current year. The producer price index is considered a leading indicator for consumer prices, which are at the center of the Federal Reserve's monetary policy. 

Inflationary pressure in Spain highest in 13 years

Consumer prices in Spain rose in September by the most since fall 2008 due to higher electricity and fuel prices. On an annual basis, the Spanish statistics office INE reported an inflation rate of +4.0% compared to +3.3% in the previous month. 

German economic research institutes revise economic forecasts

Germany's leading institutes have lowered their forecast for growth in the German economy for the current year due to supply bottlenecks and the continuing effects of the pandemic. The fall report now assumes GDP growth of +2.4% (previously +3.7%). Next year, however, the recovery is expected to accelerate again and growth of +4.8% (previously +3.9%) should be achieved. For 2023, a GDP growth rate of +1.9% (unchanged) is forecasted. At the same time, the economic institutes expect a significantly higher inflation rate of +3.0% in 2021 (previously +2.4%). Next year, it is then expected to ease to +2.5% (previously +1.7%). In conclusion, the inflationary tendencies could already increase so strongly in the forecast period that a tightening of monetary policy will become necessary. 

 

Economic Indicators October 15

MEZ Country Indicator Last period
08:45 FR Consumer Prices (September, y/y) +2.4%
10:00 IT Consumer Prices (September, y/y) +2.5%
11:00 EZ Trade Balance (August) EUR +20.7bn
14:30 US Retail Sales (September, m/m) +0.7%
14:30 US NY Fed Empire State Manufacturing Index (October) +34.3
16:00 US Consumer Confidence University Michigan (October) +72.8

 

Earnings Calender October 15

Country Company Period
SZ VAT  Q3 Trading Update
US Goldman Sachs Q3

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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