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U.S. bank earnings, BoJ and (another) virtual Davos 0

With U.S. earnings season well underway, banking heavyweights such as Goldman Sachs are lining up to report next. The Bank of Japan is the first major central bank to meet in 2022 and investors get a slew of China data to pour over.

Davos goes virtual for a second year and how long will the pound prove resilient to Britain’s rising political uncertainty?

Here’s your week ahead in markets from Ira Iosebashvili in New York, Kevin Buckland https:www.reuters.comjournalistskevin-buckland in Tokyo, Vidya Ranganathan https:www.reuters.comjournalistsvidya-ranganathan in Singapore and Karin Strohecker https:www.reuters.comjournalistskarin-strohecker and Dhara Ranasinghe https:www.reuters.comjournalistsdhara-ranasinghe in London.

1 BANKING ON IT

U.S. earnings season goes into full swing and this time it is the financial sector, with its blistering start to 2022, in focus.

The Sandamp;amp;P 500 Financials Index is up almost 6percent so far this year, while the broader Sandamp;amp;P 500 is down 2percent, as investors bet on banks benefiting from new lending and the higher yields https:www.reuters.combusinessrise-real-bond-yields-may-slow-not-stop-stock-market-bulls-2022-01-12 expected to accompany a more aggressive Federal Reserve.

Goldman Sachs and BNY Mellon report on Tuesday; Bank of America, on Wednesday. Big non-financial firms reporting include Netflix on Jan 20.

Bank executives are expected to be optimistic on the outlook, whether that is enough to sustain demand for bank shares remains to be seen. As some note, bank stocks often do better ahead of rate hikes than they do during rate increases.

2 GOOD NEWS FIRST?

The good news for Bank of Japan officials meeting Jan 17-18 inflation is creeping higher, the economy is picking up.

Consumer prices rose at their fastest pace in nearly two years in November. Even Japan’s giant of affordable attire, Uniqlo says it has no choice but to raise prices – a change in a nation where deflation is the norm and firms deal with any rise in costs by tightening belts rather than passing them on.

The bad news? Inflation is rising for the wrong reasons.

Instead of being the fruit of nearly a decade of super-charged monetary stimulus, rising prices are driven by surging energy prices and a weakening yen.

The challenge is preventing rising living costs from hurting weak household spending and a fragile recovery. So, the BOJ may debate how soon it can start telegraphing a rate hike but will also pledge to continue ultra-easy policy this year.

3 BALANCING ACT

Data on Monday should confirm China’s economy stabilised in Q4, rebounding from power outages and coronavirus setbacks and pushing 2021’s… Nokia News – Short Summary.
Source: Reuters

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