| | Top News  Shutterstock Keep an eye on loan growth at JPMorgan (JPM) as the U.S. bank kicks off the Q3 earnings season today. Supply chain problems could help boost the multiple as companies need more revolvers to increase their working capital. Credit quality will also be in focus, as well as how an increasing amount of "buy now, pay later" options is affecting JPMorgan's credit card portfolio, and whether dealmaking boosted advisory fees for its investment bank.
Key metrics: Analysts expect the bank to report a net interest margin of 1.64%, down from 1.82% a year ago, though it's hoping that number has seen the bottom given the rise in Treasury yields. At the beginning of the year, JPMorgan has also guided for $55B in net interest income for 2021, but on a Q2 earnings call, management cut that guidance to $52.5B.
Fast forward to September... Marianne Lake, co-CEO of JPMorgan's consumer and community banking division, said at a conference that prepayment rates - while still elevated - are no longer growing like they were and that management expects the NII guidance of $52.5B to hold up. Lake also provided some guidance, saying that in the division's markets business, the bank expects revenue to decline ~10% from Q2 and Y/Y, which is not a huge surprise because, at some point, activity had to normalize.
Market movement: While trading on earnings announcements is a tricky play, consensus EPS and revenue estimates are $3.00 (+2.7% Y/Y) and $29.63B (+1.6% Y/Y), respectively. Over the last four quarters, JPMorgan has sold off immediately following earnings despite some strong numbers. For those looking for a good entry point, keep in mind that the stock is up 12% over the past quarter and usually finds its footing in the week or two after earnings. | | Data The major averages fell for the third straight session on Tuesday, and there is no shortage of "headwinds out there, especially as the threat of slower growth looms large," said Chris Larkin, managing director of trading at E*TRADE Financial. Starting today, traders will be "looking for any and all indications of guidance" as the Q3 earnings season kicks off. In terms of actual numbers, earnings growth is expected to climb about 30% Y/Y this quarter following a 96.3% expansion in Q2, according to Refinitiv. Not the only concern: The consumer inflation report for September will be released today at 8:30 a.m. ET. The figure has been coming in at over 5% since June (don't worry it's transitory) and the latest number is anticipated to flare up once again. Economists expect to see a rise of 0.3%, or a 5.3% annualized rate, but even excluding volatile food and energy, core CPI is still forecast to rise 0.3%, or 4% annualized. Meanwhile, the IMF is sounding the alarm on price pressures, saying the global economy is entering a phase of inflationary risk. It even called on central banks to be "very, very vigilant" and take early action on tightening policy should inflation prove persistent. The fund also trimmed its 2021 global economic growth forecast by 0.1 percentage point to 5.9% vs. its July forecast, citing the effect of supply disruptions in advanced economies and worsening pandemic dynamics in developing countries. Other data: Coming off the weak nonfarm-payrolls numbers on Friday, the Labor Department's latest JOLTS report yesterday showed that 4.3M workers quit their positions in August. The record pace (highest since December 2000) continues a trend seen throughout the year, with hotel, restaurant and retail employees quitting in droves. The FOMC will also release the minutes from its September meeting at 2 p.m. ET, giving broader clues about the timeline surrounding the central bank's tapering plans. ( 4 comments) | | Communicated  While Chairman Powell continues to stall, the rise in the cost of goods is undercutting the administration's hope for a continued robust economy. With no room for error, the Fed is now trapped as it tries to tame the inflation beast. This leaves your portfolio caught between a rock and a hard place. The good news is you have a chance to soften the blow and come out ahead by making some key moves today… Continue Reading | | Trending Diversifying beyond cryptocurrency, Coinbase Global (COIN) is moving into the non-fungible token space. It's aiming to create a peer-to-peer marketplace that's intended to make "minting, purchasing, showcasing, and discovering NFTs easier than ever," according to the company's blog. "Just as Coinbase helped millions of people access Bitcoin for the first time in an easy and trusted way - we want to do the same for the NFTs," noted Sanchan Saxena, VP of Product.
What's an NFT again? It's a type of cryptocurrency - usually run on Ethereum blockchain - that's used to represent a unique asset and is valued as collectors' items. They are usually art, but can also be a meme, GIFs, songs, videos or items in video games. NFTs work like other speculative assets, where buyers hope that the value of it goes up, so it can be sold for a profit.
Coinbase's marketplace will help artists maintain creative control through decentralized contracts and metadata transparency. While the firm didn't say when Coinbase NFT will start, users can join a waitlist for early access to the platform, which will initially support Ethereum-based ERC-721 and ERC-155 standards and "multichain support planned soon after." The offering could also offer a new revenue stream after Coinbase shelved crypto lending plans last month due to regulatory pressure.
Stats: According to DappRadar, NFT sales exceeded $10B in the third quarter of 2021, marking a 704% increase from the previous quarter. (6 comments)
| | Energy Many questions have surfaced in recent weeks over the pace of the energy transition as a power crunch takes shape across the globe. While many arguments are covering specific policy details or green efforts, all appear to be in agreement that the world is not spending enough on future energy needs. Some of those risks were detailed in the new World Energy Outlook from the IEA, which advises governments on energy policy.
Quote: "There is a looming risk of more turbulence for global energy markets," said IEA Executive Director Fatih Birol. "Spending on oil and natural gas has been depressed by price collapses in 2014-15 and again in 2020. As a result, it is geared towards a world of stagnant or even falling demand. If the supply side moves away from oil or gas before the world's consumers do, then the world could face periods of market tightness and volatility. Alternatively, if companies misread the speed of change and over-invest, then these assets risk under-performing or becoming stranded."
"The energy transition is not being handled properly," OPEC Secretary-General Mohammad Barkindo declared last week at the Energy Intelligence Forum. "And hence we are beginning to see the fallout." The fundamental problem has been the "hysteria" that has prompted a move away from fossil fuels, shrinking much-needed investment, even in developing countries. That being said, "we call on the leading polluters, the leading emitters" to pause and work on sustainable solutions when they gather for the November COP26 climate change summit in Glasgow, Scotland.
Outlook: Oil prices are up more than 60% in 2021, while U.S. natural gas prices have more than doubled this year. "At the same time, spending on clean energy transitions is far below what would be required to meet future needs in a sustainable way," the IEA added in the report, advocating for annual spending on clean energy to triple to $4T by the end of the decade in order to achieve net-zero emissions by 2050. Emissions can drop by 40% using technologies that pay for themselves, according to the IEA, though the majority of the investment (nearly 70%) would have to come from private developers and Wall Street. This could also create "huge economic opportunities" for clean energy technologies such as wind turbines, solar panels, fuel cells, electrolyzers and a new era of batteries. | | In Asia, Japan -0.3%. Hong Kong +0.2%. China +0.4%. India +0.8%.
In Europe, at midday, London -0.1%. Paris +0.2%. Frankfurt +0.7%. | | |
EmoticonEmoticon