News & Analysis

Coming Up This Week: Big Banks and Netflix

July 14, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

The earnings season will kickstart with big banks like JP Morgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Bank of America, Morgan Stanley, and tech stock like Netflix. Investors are probably bracing themselves for a gloomy earnings season. It is unlikely that companies will be able to provide guidance for the near future given the uncertain nature of the economy and the resurgence of the number of coronavirus cases threatening the anticipated recovery path.

Monday

PepsiCo, Inc (PEP)

PepsiCo products are enjoyed by consumers more than one billion times a day in more than 200 countries and territories around the world. However, due to social distancing measures that halted many large gatherings or activities such as concerts and sporting events, demand for the company’s products: Food, snack and beverage might have taken a severe hit. The share price of the American multinational corporation has been trading in a relatively tight range in the last few months. As of writing, its share price is currently at $134.50.

The Company will issue its second quarter 2020 (ending June 13) financial results and other related information on Monday, July 13, 2020 by posting the following materials and links on the company’s website. Live question and answer session for analysts with Ramon Laguarta, Chairman and Chief Executive Officer, and Hugh Johnston, Vice Chairman and Chief Financial Officer at 8:15 a.m. EDT

Tuesday to Thursday

We will see plenty of major US banks reporting their quarterly updates from Tuesday to Thursday. JP Morgan, Citigroup Wells Fargo Goldman Sachs, Bank of America and Morgan Stanley all reported a significant drop in profits in the last quarter. Overall, the banks had made significant provisions for credit losses and saw major declines in asset management revenues. We would expect the banks to make more provisions of loan losses given the ongoing pandemic crisis.

JP Morgan Chase & Co (JPM): The company will host a conference call to review second-quarter 2020 financial results on Tuesday, July 14, 2020 at 8:30 a.m. (Eastern). The results are scheduled to be released at approximately 7:00 a.m. (Eastern)

Citigroup Inc: Citigroup will issue its second-quarter results via press release at approximately 8 a.m. (ET) on Tuesday, July 14, 2020. At 10 a.m. (ET), results will be reviewed via live webcast and teleconference.

Wells Fargo & Co: The Company will report its second-quarter 2020 earnings results on Tuesday, July 14, 2020, at approximately 5 a.m. PT (8 a.m. ET).  The Company will host a live conference call on Tuesday, July 14, at 8 a.m. PT (11 a.m. ET).

 Goldman Sachs Group Inc (GS)

The Company will host a conference call for its second quarter 2020 earnings results on Wednesday, July 15, 2020, at approximately 9.30 a.m. ET. The financial results will be released at approximately 7:30 am (ET) on the same day.

Bank of American Corp (BAC)

The Company will report its second-quarter 2020 financial results on Thursday, July 16. The results will be released at approximately 6:45 a.m. ET, followed by an investor presentation at 8:30 a.m. ET.

Morgan Stanley (MS)

The Company will announce its second-quarter 2020 financial results on Thursday, July 16, 2020, at approximately 7:15 a.m. (ET). A conference call to discuss the results will be held on July 16, 2020, at 8:00 a.m. (ET).

Thursday

Aside from major banks reports on Thursday, Johnson & Johnson and Netflix will be among the major companies providing their quarterly updates:

Johnson & Johnson (JNJ)

The Company will host a conference call for investors at 8:00 a.m. (Eastern Time) on Thursday, July 16th to review second-quarter results.

Netflix Inc. (NFLX)

Netflix reported a $5.8billion in revenue with a year-on-year growth of 27.6%. The number of subscribers came was above estimates and more than double its target with 15.77 million paid subscribers. The substantial growth came in March as the lockdown, and social distancing measures forced many more households to join Netflix. However, a lack of high-quality content following the pause in production was one of the main concerns identified in the last earnings report that could impact on revenue and growth.

The Company will post its second-quarter 2020 financial results and business outlook on its investor relations website on Thursday, July 16, 2020, at approximately 1:00 p.m. Pacific Time.  A video interview with Netflix Chief Executive Officer Reed Hastings, Chief Financial Officer Spence Neumann, Chief Content Officer Ted Sarandos, Chief Product Officer Greg Peters and VP, IR & Corporate Development Spencer Wang will be available at 3:00 p.m. Pacific Time.

Friday

Snap Inc. (SNAP)

Snap’s user base grew to 229 million daily active users, up by 20% from last year in the last quarter as people were in various forms of lockdown. However, the ongoing uncertainties and the rapidly shifting macro conditions, the company did not provide any expectations for revenue.

The Company will hold its quarterly conference call to discuss second quarter 2020 financial results on Tuesday, July 21, 2020 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).

By Deepta Bolaky
 @DeeptaGOMarkets


Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice. For more information of trading, check out our forex trading courses.

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By Deepta Bolaky
 @DeeptaGOMarket

EU Recovery Fund

After a standoff between the EU and Germany, following a critical ruling on ECB’s quantitative easing program by Germany’s constitutional court, the gradual reopening of economies of member states within the Eurozone has brought some optimism.

The downside risks for the Eurozone and its shared currency have somewhat eased on the fact that Europe, which was the epicentre of COVID-19 after China, might have gone through the worst phase of the pandemic. The sentiment for the Euro was also buoyed by the EU Recovery fund proposed by Chancellor Angela Merkel and President Emmanuel Macron to help Europe’s mostly hit countries.

Unfortunately, the optimism over the coronavirus fund proposal, which aims to show unity in overcoming the crisis and to achieve quicker economic recovery, was short-lived.

Europe’s Frugal Four 

Amid an unprecedented crisis, the Franco-German proposal was to provide support and reinforce EU financial relations and show that Europe is standing together. Austria, Denmark, the Netherlands and Sweden, dumbed as the “frugal four” put forward a counter-proposal that highlights the diversion of opinions in helping the Southern members states.

Grants or Loans

The Franco-German proposal is about “overcoming the crisis united and emerging from it stronger”. Both leaders proposed to make outright grants to help countries in need. They want to launch a temporary fund of 500 billion euro for EU budget expenditure:

“This would not provide loans, but rather budget funding for the sectors and regions hit hardest by the crisis. We firmly believe that it is both justified and necessary to now provide funding for this from the European side that we will gradually deploy across several European budgets in the future.”

In contrast, the frugal four wishes to provide loans rather than grants to southern European countries and expect the recipients of loans to comply with the fundamental principles of the EU and commit to strong reforms in repaying the loans. Their two-year and “one-off” proposal appears to also outline how those countries should use the funds and target sectors that are mostly hit based on an assessment.

The coronavirus pandemic is testing the solidarity of European members and is threatening to reawaken a euro crisis. Southern countries like Greece, Italy and Spain lacked the fiscal space they need to put forward an economic stimulus package to support their economies, compared to Northern countries. 

Disparity? Compromise?

Both proposals are saying “yes” to emergency aids to assist with recovery, but the disparity lies on how the funds will be financed to respond to the economic wreckage. The size of the emergency fund, the conditions of the funds or whether it will be grants or loans will be a compromise the markets are expecting to see. However, the type of compromise might be a key factor in determining the relationships of EU members.

Unprecedented times probably need unprecedented Unity.

Euro – The Shared Currency

The fact that Europe may have gone through the worst phase of the coronavirus has somewhat eased the downside risks of the shared currency. But the current geopolitical tensions with China and uncertainties on the EU Recovery plan are putting a lid on the upside momentum of the Euro.

After the sharp plunge in March, the EURUSD pair has been trading within the 1.08 to 1.09 range. Yesterday, the better-than-expected IFO Surveys in Germany has helped the pair to hold ground and hover around the 1.09 level. The recovery plan could mitigate the selling pressure and allow a probable move above 1.10 level if there is a compromise that satisfies the frugal four.

EURUSD

Source: Bloomberg Terminal

The immediate attention turns to the European Commission which is supposed to unveil a draft recovery plan on May 27th, 2020.

By Deepta Bolaky
 @DeeptaGOMarkets

Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

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