Asian bourses mostly shrugged off Wall Street’s subdued handover, as major US banks Q1 earnings and CPI figures were on the radar. The Hang Seng and Shanghai Composite were mixed in performance, as Alibaba shares extended on the previous day’s post-penalty gains and after affiliate Ant Group kowtowed to Beijing via an overhaul in which it will become a financial holding company. However, the overall price action was indecisive as traders digested the March trade figures, which was USD a surplus of 13.80bln, narrower than the expected and the prior (exp. 52.05bln, prev. 103.25bln), seasonal were unfavourable, and the surplus will rebound in the months ahead.
In Wall Street, equities have opened sideways with outperformance in Nasdaq amid the drop in yields after the latest CPI print, which rose 0.1% faster than expected. It is possibly soothing some of the investor’s nerves that inflation could rocket due to low base effects, reopening, and stimulus largesse. However, investors are expecting more inflation is expected in the months ahead. Some participants suggest the US economy could see headline inflation move above 4% in 2021. Banks were hit with the flatter yield curve, hurting the outlook ahead of the key large caps JPMorgan (JPM), Wells Fargo (WFC) and Goldman Sachs (GS) reporting today morning. Later this week, the market focus shifts to Citigroup (C), Bank of America (BAC), and Morgan Stanley (MS), which look like earnings came through the quarter mostly with flying colours. Equity desks expect the banks’ earnings releases to feature three key themes that shape financial results: the impact of a zero-interest rate environment, the required level of loan loss reserves and the contribution of fees from the investment banking unit.
