Financial market research and analysis

The FTSE 100 stocks began the day upbeat, except for British publisher, Pearson, which plunged by a dramatic 24.01% after the company issued a profit warning, announced plans to cut future dividends and said it plans to sell its stake in Penguin Random House.

The GBPUSD’s rise remained capped at 1.2416, after UK Prime Minister Theresa May said that there will be a final parliamentary vote to give lawmakers a chance to voice their opinion on the UK’s exit from the EU’s single market. Although she pledged to quit the single market, hopes that May’s Brexit proposal would be solid, and if not could be rejected by Parliament, wet pound traders’ appetite. The hard Brexit talks will remain in the UK headlines and will continue pressuring its currency downwards. Nevertheless, the GBPUSD could take a breather until a new wave of news hit the wires. The 100-day moving average, 1.2460, stands as a solid mid-term resistance.


Citigroup, Goldman Sachs announce earnings before the US open

The US dollar sold-off aggressively in the US session after US President-elect Donald Trump told the Wall Street Journal that the US dollar was too strong against the Yuan. The dollar plunged below 6.85 against the Renminbi, before consolidating between 6.8489 and 6.8662 in Hong Kong.

The S&P500 and the Dow Jones closed the day 0.30% lower in New York. US retailers rallied on Donald Trump’s hesitation regarding his cross border tax plan, yet the big US banks plunged by the most in seven months on rising speculations that the tax breaks would not happen as previously thought. Morgan Stanley lost 3.79%, JPMorgan Chase & Co wrote-off 3.63%, as Goldman Sachs slid 3.50%.

We continue watching the US banks today. Goldman Sachs and Citigroup are due to announce earnings before the US open.

Goldman Sachs’ adjusted EPS is expected at 4.84. By mid-2016, the 12-month price forecast by analysts stood below $150, posterior to Donald Trump’s election, the price forecast skyrocketed to $246. In a similar fashion, Citigroup’s adjusted EPS is forecasted at 1.12.

Citigroup’s 12-month share price target rose to $64.34, from a touch above $40 by mid-June. Nevertheless, if Donald Trump fails, or delays to deliver his promises, we should see a downside correction on a Trump-induced price change.

Citigroup strategists warned that the S&P500 could be ‘at risk of unwinding the post-election rally and moving back to $2’200’.

The S&P500 closed at $2267.89 on Tuesday. US equity futures were better bid in Asia, as the risk-off dissipated. Gold and the yen eased for the first time in more than a week.

The US stocks are set for a slightly positive open. Due today, US inflation could revive or discourage the Federal Reserve (Fed) hawks for a further US dollar correction across the board. The headline inflation could have accelerated to 2.1% on year to December, from 1.7% printed a month earlier. Of course, the stronger US dollar could’ve tempered the rise in consumer prices during Christmas 2016. Solid inflation data should resuscitate speculations of a hawkish Fed, while a soft read would not be dramatic given that the rising inflation expectations under Donald Trump’s rule would at some point be reflected in the actual inflation figures.

Fed Chair Janet Yellen will speak at the Commonwealth Club in San Francisco about ‘The Goals of Monetary Policy and How We Pursue Them’. We do not expect to hear any new, unpriced insight vis-à-vis the Fed’s policy.