“Continued consumption despite high prices” [Jo Jaegil’s Key Issue]

[간밤 월드뉴스 총정리 4월15일] This is the core issue of Correspondent Cho Jae-gil of the Korea Economic Daily, who summarizes the world news last night. The PowerPoint (PPT) used in the Global Market Now broadcast is attached at the bottom of the article (available for download).

Large banks’ strong performance surprised the market

Large banks such as JP Morgan (JPM), Citigroup (C) and Wells Fargo (WFC) posted better-than-expected first-quarter results. Both earnings per share (EPS) and revenue exceeded expectations. JP Morgan sales surged 52% compared to the same period last year.

A summary of the performance of large banks reveals the following characteristics:

1. Net interest income increased significantly. This is due to the interest rate hike by the US Central Bank (Fed).

2. We saw an increase in sales due to a surge in bond trading. Bond trading sales increased as bond prices soared in anticipation of interest rate cuts. It offset weak equity trading and investment banking (IB) trading.

3. The provision for bad debts has been greatly increased. In preparation for insolvency in commercial real estate, etc., more reserves were accumulated all at once.

4. Deposit inflows differentiated even among large banks. JP Morgan, the largest, inflowed $37 billion in three months, but it leaked from Citi Wells Fargo and others.

JP Morgan shares rose 7.55%, Citigroup shares rose 4.78%, and Wells Fargo shares fell 0.05%.

What is the economic outlook of financial CEOs?

The remarks of CEOs of financial companies drew attention.

Jamie Dimon, chairman of JP Morgan, said, “The US economy is generally on a solid foundation.” He said the dark clouds are still there, but the banking crisis seems to have passed.

“We need to be prepared for the possibility that higher interest rates will last longer,” Dimon advised.

Citigroup CEO Jane Fraser said, “Consumer spending slowed markedly during the first quarter.” He saw that “a moderate downturn may occur in the second half of this year in the aftermath of the regional bank crisis.”

On the other hand, BlackRock CEO Larry Pink predicted, “I don’t know early next year, but there will be no recession this year.” At the same time, he said, “There is a high possibility that high prices will continue, but it is difficult for consumer prices to fall further from the 4% level.”

This means that if the consumer price index (CPI), which slowed to 5.0% last month (compared to the same period last year), slows down to the 4% range, it will not be easy to further lower it.

Waller’s hard line…market “25 basis points additional increase”

Again, hawkish (preferring monetary tightening) comments within the Fed.

Director Christopher Waller, who attends the Federal Open Market Committee (FOMC) every time, said, “If you look at the underlying price trend, there is no significant progress toward the inflation target (2%).” .

He emphasized the need for further austerity, saying, “The economy is in a stronger shape than originally expected.”

Rafiel Bostik, president of the Federal Reserve Bank of Atlanta, also emphasized, “The price index itself is encouraging, but the rate of increase is still fast.”

Ostan Goolsby, president of the Chicago Fed, said, “Looking at wholesale prices and retail sales trends, the economy is heading in the right direction.”

One-year expected inflation raised concerns·retail sales

Two economic indicators fueled market concerns.

First, the one-year expected inflation for the University of Michigan. As of April, it was taken at 4.6%. Consumers believed that consumer prices would remain at that level even after a year. It jumped 1 percentage point from 3.6% a month ago. It is the highest since January last year. The general interpretation is that the prospect of rising oil prices due to crude oil production cuts by the Organization of Petroleum Exporting Countries (OPEC) Plus was reflected.

Retail sales were down again in March.

It decreased by 1.0% compared to a month ago. The decline was larger than market expectations (-0.5%). Compared to a year ago, it increased by 2.9%, the highest since June 2020.

In particular, consumption of high-end products such as home appliances, home improvement products, automobiles and furniture in department stores has slowed significantly.

Electric cars are all weak, why?

Electric car stocks fell side by side, for different reasons.

Tesla (TSLA) launched additional price discounts in Europe, Israel and Singapore. While the US government is trying to reduce incentives for eco-friendly cars, it has been interpreted as a desperate measure due to sluggish sales. On the other hand, some point out that in the long run, it can act as a good news to widen the gap with competitors. Tesla still has the largest profit margin among electric vehicle manufacturers. Tesla stock fell 0.48% to $185 per share.

Rivian (RIVN) shares fell 6.89%.

Analyst Alexander Porter Piper Sandler, who has been analyzing Rivian for a long time, lowered his target price for Rivian from $63 to $15. The investment rating was also downgraded from Buy to Neutral.

“Rivian needs $4 billion to stick to its current long-term growth strategy,” Porter said. For existing shareholders, this is a warning that share price dilution may come out.

Lucid Motors stock fell 6.3%.

This is because of the announcement that production in the first quarter was only 2314 units and delivery was only 1406 units. In the fourth quarter of last year, the company produced 3493 units and delivered 1932 units.

New York = Correspondent Cho Jae-gil [email protected]