Highlight of the Day
Jane Fraser, CEO of Citi – Makes her mark to restore order in the midst of chaos
U.S.’s third largest lender reported $7.94 billion in profit, triple $2.54 billion a year earlier, as it released funds set aside to cover pandemic loan losses
Fraser, who took over from Michael Corbat on March 1, is trying to bring Citigroup, an industry laggard hobbled by creaky technology and poor risk-management controls, in line with its peers in terms of profitability and share price performance
As part of that strategy, the bank said on Thursday it would exit consumer businesses in 13 Asia and EMEA countries, including the major markets of Australia, China and India where she said the bank does not have the necessary scale to compete
Citigroup’s investment banking revenue surged 46% on stronger equity underwriting fees. The bank has been a leader in raising money for the so-called blank-check firms or special purpose acquisition company frenzy, which has seen $100 billion worth of U.S. deals this year
Net interest revenue, the difference between interest the bank earns and what it pays on deposits and borrowings, was $10.17 billion, down 12% from a year earlier. Total revenue fell 7% to $19.3 billion on low interest rates and a 10% decline in loans, largely due to lower consumer credit card loan balances
Overall card purchase sales were up 1%, even as total card revenue fell 18%
Markets and securities revenue for Citigroup rose 2%
Expenses also rose 4%, in line with the company’s projections, on increased spending to fix its risk controls and improve its operations
“Our first impression is the incoming CEO Jane Fraser is striking the right cord on messaging a sense of urgency to undertake strategic changes that enhance the profitability profile,” bank analyst Saul Martinez of UBS wrote in a note.
“We believe our capital, investment dollars and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” Jane Fraser, CEO of Citi said.
Market Highlights at 07:00 a.m. I.S.T.
• The MSCI Asia Pacific ex-Japan is trading lower -0.21%, and the MSCI Emerging Market index is down -0.18%
• Trends on SGX Nifty look poised for a muted opening for Nifty 50 in India. The Nifty futures are trading 9.5 points or -0.06% lower at 14,610 on the Singaporean Exchange at 07:00 a.m. I.S.T.
• U.S. equity futures slipped in early morning trade after equity benchmarks hit all-time highs overnight; alongside a mostly negative start in Asia-Pacific benchmarks gauges in early Friday trade with shares declining in Japan, South Korea, Australia and rising in Hong Kong; a negative MSCI Asia-Pacific ex-Japan index; U.S. dollar steadying at 91.77 after a streak of declines with 10-Yr Treasury Yields declining to 1.57%; Indian rupee nursing earlier earlier losses at 74.7060 and Gold futures advancing $1,761 an ounce indicate a steady but volatile outlook in Indian equity markets amid a channel-wise resistance and a decoupling from global benchmarks
India Markets
India’s equity benchmarks closed higher in a volatile session on Thursday trade after the government vowed to speed up Covid-19 vaccine approvals, with drug firms and private-sector lenders leading the gains
The blue-chip NSE Nifty 50 index added 76 points or 0.53% to 14,581 and the benchmark S&P BSE Sensex added 260 points or 0.53% to close at 48,803
Bank Nifty added 341 points or 1.07% to settle at 32,112
Broader markets under-performed headline peers — Midcap 100 index added 0.06%; Smallcap 250 index dropped -0.32% and Nifty 500 added 0.42%
Nifty P/E for Apr. 15 increased to 32.78 from 32.72 with Nifty P/B edged higher to 4.17 from 4.15, as recorded by NSE India
India VIX or the barometer of nervousness in the market, moved up 2.10% to 20.89 levels
Overnight Call Money rate weighted average stood at 3.21% as per RBI data. It moved in a range of 1.90 — 3.50% for Apr 12
Under Liquidity Operations by RBI, Reverse Repo for the week (Mar 29 to Apr 04) rose above 6 lakh crores (6.13 lakh crores), marking higher surplus liquidity in the market
Yield curve on the benchmark 10-Yr government bond steepened to 6.12%, while the rupee strengthened 74.7060 per U.S. dollar
Private banks ended the session 0.8% higher, with HDFC Bank Ltd jumping 2.1%. Expectations of robust earnings results from the private banks were driving interest in the sector
Pharmaceutical companies rose amid rising demand for drugs, including remdesivir
America Markets
U.S. equity benchmarks advanced on Thursday trade after strong earnings and upbeat economic data sent stocks climbing
The broad-based S&P 500 added 45.76 points, or 1.1%, to 4170
The Dow Jones Industrial Average, composed mostly of cyclical stocks, advanced 305.10 points, or 0.9%, to 34035, its 20th record close of the year
The tech-heavy Nasdaq Composite Index climbed 180.92 points, or 1.3%, to 14038
U.S. equity futures edged lower in early Friday trade. S&P500 futures is down -0.12%; Dow Jones futures is down -0.09% and Nasdaq futures is down -0.23%
Government bonds strengthened. 10-Yr U.S. Treasury yields, which move in the opposite direction to bond prices, fell to 1.57% in early Friday, a level not seen in a month, in the aftermath of solid demand for 30-, 10-, and 3-year bond auctions, which eased some fears that investors would struggle to soak up the flood of supply hitting the market. Dollar is weak at 91.77
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” moved down -2.47% to 16.57 on Thursday
First-quarter earnings season kicked off in earnest this week, and on Thursday several big banks reported profits that exceeded forecasts. Analysts expect that earnings among companies in the S&P 500 jumped 30% in the first quarter from the same period a year earlier, according to FactSet
Citigroup trounced first-quarter profit expectations due to a rebound in the broader economy and a jump in investment banking activity
U.S. retail sales rose by the most in 10 months in March as Americans received additional pandemic relief checks from the government and increased COVID-19 vaccinations allowed broader economic re-engagement, cementing expectations for robust growth in the first quarter. Retail sales rebounded 9.8% last month, the largest increase since May 2020, the Commerce Department said. Retail sales surged a record 27.7% on a year-on-year basis
The brightening economic prospects were underscored by other data on Thursday showing first-time claims for unemployment benefits tumbled last week to the lowest level since March 2020. Claims have dropped from a record 6.149 million in early April 2020. In a healthy labor market, claims are normally in a range of 200,000 to 250,000
The economy created 916,000 jobs in March, the most in seven months. Employment remains 8.4 million jobs below its peak in February 2020
“Demand is booming right now. Fed officials up to now have said they expect this boost in demand to be fleeting, and will not consider changes in policy until the labor market is at full employment and price levels increase at a sustained pace,” said Chris Low, chief economist at FHN Financial in New York.
“Although one cannot read too much into any one week’s reading on jobless claims, the degree of the drop in initial filings, hints at a strong labor market in early April as Covid-related restrictions in various states were eased,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Asia-Pacific Markets
Asian stocks fluctuated in early Friday trade after surprisingly robust economic data helped propel U.S. indexes to records
Shares wavered between red and green in Japan, South Korea and Australia and rose in Hong Kong
Japan’s Nikkei 225 added 0.13% to 29,681 and Topix 500 dropped -0.10% to 1,521
South Korea’s Kospi dropped -0.08% to 3,192
In Hong Kong, Hang Seng added 0.10% to 28,817 and Hang Seng China Enterprises added 0.12% to 10,919
In China, CSI 300 dropped -0.64% to 4,948 and Shanghai Composite added 0.26% to 3,408
Australia’s S&P/ASX 200 dropped -0.05% to 7,055
The Bank of Korea stood pat on its record-low interest rate as it seeks to sustain the economy’s recovery momentum amid rising coronavirus cases. The South Korean bank kept its seven-day repurchase rate at 0.5%
While Korean economy’s outlook is still relatively bright, helped by exports and extra fiscal spending, a worsening outbreak and a shortage of vaccines are raising concerns that the recovery may not spread more broadly across the economy, adding to the view that the central bank will keep rates low for some time to come
BOK Governor Lee Ju-yeol said last month that the economy is likely expanding faster than the central bank’s 3% projection in February, while seeking to dispel any speculation of an early tightening. The central bank’s updated quarterly outlook is due in May
Financial stability is also increasingly on the minds of the BOK board, suggesting any further easing to aid the recovery is unlikely. A fast increase in household debt has led to soaring home prices that exacerbate economic disparities and raise the risk of a bubble
China economic growth, industrial production and retail sales figures are due on Friday
“The virus outbreaks are the reason the Ban of Korea lowered its rate in the first place and that means it won’t tighten until they are resolved,” said Cho Yong-gu, a fixed-income strategist at Shinyoung Securities. “The prospects are unclear as South Korea is behind on vaccinations and herd immunity may not be achieved by November.”
EU Markets
European stocks closed at a record high on Thursday trade as a rally in commodity prices lifted mining stocks and a slate of upbeat earnings reports offset worries about the pace of Covid-19 vaccinations
The pan-European Stoxx Europe 600 added 0.58% to 434 and Stoxx 50 added 0.43% to 3,993
Germany’s DAX30 added 0.30% to settle at 15,225
London’s blue-chip FTSE 100 added 0.63% to settle at 6,983
France’s CAC40 added 0.41% to settle at 6,234
The euro zone economy is still standing on the “two crutches” of monetary and fiscal stimulus and these cannot be taken away until it makes a full recovery, European Central Bank President Christine Lagarde said on Wednesday. In March, the ECB upped the pace of its Pandemic Emergency Purchase Programme to stem a rise in bond yields and keep credit cheap for governments, companies and households
The UK’s commodity-heavy FTSE 100 rose 0.6% to its highest level since February 2020 as a surge in metals prices lifted shares of companies such as Rio Tinto, Anglo American and BHP
While European stocks have now recovered all of their pandemic-induced losses from last year, they have lagged their U.S. counterparts due to a choppy Covid-19 vaccine roll-out as well as a new wave of infections across the continent
Analysts expect earnings at STOXX 600 firms to rebound more than 50% in the first quarter following a slide of nearly 40% in the same quarter a year earlier, according to Refinitiv I/B/E/S data
“The euro zone economy might lag others more than we had expected previously because of the concerns around AstraZeneca,” said Paul Jackson, global head of asset allocation research at Invesco. “Notwithstanding that, once they are vaccinated, European countries have more to gain than most others.”
Oil & Natural Gas Markets
Crude-oil prices held near a one-month high in early Friday trade, following positive U.S. economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC as countries start to recover from the Covid-19 pandemic
Also, a weaker dollar makes oil cheaper for holders of other currencies, which traders said also helped support crude prices
WTI Crude is trading at $63.39 per barrel
Brent Crude, the international benchmark for oil, is trading at $66.86 per barrel
Natural Gas futures rose slightly to $2.667/MMBtu
“Better-than-expected stockpile data – both EIA and API – a weaker U.S. dollar and optimism surrounding more energy demand helped oil book its strongest daily gains since late March on Wednesday,” Griffiths said, referring to weekly data from the U.S. Energy Information Administration and industry group the American Petroleum Institute.
“We remain positive on Brent oil forecasting $80 (per barrel in the third quarter) on a near-term demand recovery and supply discipline,” Goldman Sachs analysts said.
Commodities Markets
Gold prices jumped to its highest in over a month in early Friday trade, as the dollar and U.S. Treasury yields retreated despite better-than-expected U.S. economic data, pushing more investors to bullion as a refuge against possible inflation ahead
Making gold more appealing for holders of other currencies, the dollar slumped to a four-week low, while retreating benchmark 10-year U.S. Treasury yields further boosted bullion’s appeal
Gold is in a “bottoming-out phase” with support at a low of $1,680 an ounce and an upper bound of $1,760 an ounce
U.S. Gold futures (Comex) is trading at $1,762 an ounce
Silver futures (Comex) is trading at $25.80 an ounce
Copper futures (Comex) rebounded to $4.2370 per pound
In India, Spot Gold is trading at INR 47,057 per 10 grams
“A massive amount of inflation is certainly on the horizon and gold is just the best asset to own as we start to see what I would consider some historic levels of inflation,” said Jeffrey Sica, founder of Circle Squared Alternative Investments. “It is more of a weak dollar, strong economy, low interest rate dynamic that’s moving gold prices up.”
Currency Markets
U.S. dollar index, DXY slightly changed at 91.77 in early Friday trade, as strong demand at a U.S. bond auction fueled a widespread drop in Treasury yields, reducing the interest rate advantage the greenback held over other major currencies
A slew of data releases in the U.S. calendar, including upbeat retail and jobless claims data, drove investors into riskier currencies, such as the New Zealand and Australian dollars. Aside from the economic indicators, the Federal Reserve’s insistence that it will keep financial conditions as lenient as possible until the US economy heals from the effects of the coronavirus pandemic seems to be making it difficult for the greenback to attract new investors
INR weakened with USD / INR at 74.8100
EUR weakened with EUR / USD at 1.1961
GBP strengthened with EUR / GBP at 0.8681
GBP weakened with GBP / USD at 1.3777
GBP is expected to be moving closer an over two-month low of $1.367 hit last week, following the Bank of England’s announcement that its chief economist, Andy Haldane, will be leaving the central bank after the June meeting. Haldane was seen as the most hawkish member of the MPC and investors believe he might be replaced by a dovish policymaker
“The Fed’s continued commitment to loose monetary policy remains a key assumption behind our view that it is still too premature to expect a sustained U.S. dollar rally at the current juncture,” MUFG strategists said.
| 3-Month LIBOR Rate | As on 15 Apr 2021 |
| US DOLLAR | 0.18 per cent |
| Euro | – 0.55 per cent |
| British Pound | 0.09 per cent |
| Swiss Franc | – 0.75 per cent |
| Japanese Yen | – 0.07 per cent |
Bitcoin
Bitcoin / U.S. Dollar rose 0.09% in early Friday trade to $63,300 as of 07:00 a.m. I.S.T.
Bitcoin breached the $64,000 level for the first time as investor demand for all things crypto surged amid Coinbase Global Inc.’s public debut
The direct listing of the biggest U.S. crypto exchange is seen pushing tokens even more into the mainstream of investing, exposing legions of potential buyers to the digital asset class that have grown into a $2 trillion industry in little more than a decade. Bitcoin, the original and biggest crypto coin, is valued at more than $1 trillion alone after a more than 800% surge in the past year
Bond Markets
Americas : 10 – Year Govt Bond Yields
United States : 1.57%
Canada : 1.44%
Europe, Middle East & Africa : 10 – Year Govt Bond Yields
Germany : -0.29%
United Kingdom : 0.74%
France : -0.04%
Asia Pacific : 10 – Year Govt Bond Yields
India : 6.12%
Japan : 0.08%
Australia : 1.76%
South Korea : 2.02%
Fund Flows on NSE, BSE and MSEI — 15 Apr 2021
FII/FPI Net Buy Rs 979.70 Crore in Capital Market
DII Net Sell Rs (526.63) Crore in Capital Market
Where We’ve Been Reading —
- Bloomberg
- The Wall Street Journal
- Reuters
- Trading Economics
- Seeking Alpha
- Axios
- Tech Crunch
- NSE Indices India
- Morningstar India
- The Star
- Harvard Business Review
- The Economic Times
