By Geoffrey Smith
Investing.com -- Goldman Sachs (NYSE:GS) and other banks pick up the baton in earnings season, with more pandemic-driven writedowns a near-certainty. Apple (NASDAQ:AAPL) wins a key court decision in its tax case against the EU. Industrial production data for June are due and there may be more hints from the Fed about the need for further stimulus. And OPEC technical staff meet to map out a timeline for restoring oil supply to the world after the pandemic shock. Here's what you need to know in financial markets on Wednesday, July 15th.
1. Bank earnings, part 2 (Starring Goldman, BoNY&PNC)
Citigroup (NYSE:C), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) all underperformed the broader market on Monday after taking a combined charge of $28 billion against possible and actual loan losses, overwhelmingly the result of the pandemic and the ensuing lockdowns.
However, the losses were cushioned by record gains on bond trading and better-than-expected investment banking business – something that Goldman in particular will be looking to emulate. PNC’s numbers and outlook, meanwhile, will be improved by the sale of its stake in Blackrock (NYSE:BLK).
2. Industrial production data due as dollar hits four-month low vs euro
It’s a heavy day for U.S. data, with industrial production and manufacturing output data due at 9:15 AM ET. That’ll come after weekly data on mortgage applications at 7 AM and the New York Empire State manufacturing index at 8:30 AM.
Philadelphia Federal Reserve President Patrick Harker is also due to speak, and the dollar may be susceptible to any further hints of the need for more monetary stimulus. Fed Governor Lael Brainard drove the dollar to a four-month low against the euro on Tuesday by suggesting that the Fed may need to pivot from a focus on ‘stabilizing’ the economy to something more ‘accommodative’.
Her comments are the latest from Fed officials expressing concern at signs that the rebound in economic activity is leveling out.
3 Stocks set to open higher; health, advertising updates due
U.S. stock markets are set to open, buoyed by the publication after Monday’s close of a study showing positive early-stage test results for Moderna’s experimental drug for treating Covid-19. Brainard's comments are also helping keep the mood upbeat.
By 6:15 AM ET (1015 GMT), the Dow futures contract was down 253 points or 1.0%, while the S&P 500 Futures contract was up 0.7% and the Nasdaq 100 futures contract was up 0.4%
In addition to the banks named above, there are also quarterly updates from UnitedHealth, advertising giant Omnicom and, after the closing bell, eBay. UnitedHealth (NYSE:UNH)'s earnings came in ahead of expectations, but revenue fell short.
4. Apple's court victory on EU tax case
The European Union’s second-highest court struck down on appeal an antitrust ruling that would have forced Apple (NASDAQ:AAPL) to pay some $15 billion in tax back to the Irish government.
The court ruled that Competition Commissioner Magarete Vestager hadn’t proved that the sweetheart tax deal concluded between Apple and Ireland had been aimed at ensuring competitive advantage.
The ruling is a stinging defeat for the European Commission, which has had smaller successes against other U.S. and European companies in their aggressive exploitation of EU tax loopholes. It’s a victory not just for Apple, but for Ireland and other smaller EU members who have used such sweetheart deals to attract inward investment over the years.
5. OPEC staff meeting to advise on summer output levels
A meeting of OPEC’s technical staff is expected to produce a more granular timetable for restoring supply to the world oil market as demand recovers from the pandemic shock.
According to newswire reports, the meeting, due to begin at 8 AM ET (1200 GMT), is likely to result in a recommendation that countries guilty of overproducing in the last three months – notably Iraq, Nigeria and Angola - compensate for that by cutting output further over the next two.
The net effect would be that total supply increases in August by less than the 2 million barrels a day foreseen under the current ’OPEC+’ deal – a mildly bullish outcome. The recommendations will still need to be ratified by ministers, however.
U.S. crude prices were steady above $40 on the back of a sharp drop in U.S. inventories reported by the American Petroleum Institute late on Tuesday. The U.S. government’s weekly data are due at 10:30 AM ET.