Coinbase’s highly anticipated initial public offering came into the spotlight on Wednesday, obscuring the results of banks, which kicked off the earnings season with a bang.
We call of the day is from the research firm BCA Research and insists that investors prefer an overweight allotment of bank shares in their portfolios, as a number of factors support the continued strength in finance.
First-quarter earnings at the banking giants were boosted by large withdrawals in the loss reserves, which by the end of 2020 were more than double the pandemic levels ahead of COVID-19. As the economic recovery from the pandemic continues, banks will continue to release reserves as the need to provide for large potential loan losses eases, BCA said.
But going forward, banks need to focus on their ability to expand loan portfolios. The core profit of banks is the lending of short-term lenders at low interest rates and the long-term loans at higher interest rates. The dynamics of fiscal stimulus in the U.S. have caused deposits to rise and loans to shrink, but that is expected to change once the economy reopens, BCA said.
Source: BCA Research.
The effects of the vaccine are accelerating, and by September, COVID-19 herd immunity would ease restrictions, which would increase consumer confidence and accelerate labor market recovery, BCA said. All of this will encourage spending and yet another new leverage, especially since household balance sheets are largely healthy, according to the group.
This is exactly what is happening: the Federal Reserve’s consumer credit survey of February showed that US consumer lending had risen by $ 27.6 billion – 7.9% annually – the most since November 2017.
More spending and a reduction in savings should, according to BCA, increase U.S. Treasury yields, with strong growth yielding long-term returns, while short-term bonds have more resistance due to the Fed’s accommodative policy stance. This will further strengthen the yield curve, BCA said, and it is another boost to the banking outlook.
The buzz
ARK Invest snatched $ 246 million worth of Coinbase shares after the cryptocurrency exchange became known on Wednesday in a “watershed moment” for crypto. The fund power station run by Cathie Wood has sold Tesla shares worth $ 178 million to make way for Coinbase COIN,
in three funds, including the flagship ARK Innovation ETF ARKK,
It is a striking day on the US economic front with a spate of data that largely beats expectations. The initial unemployment claims for the week of April 10 rose to 576,000, well below the 710,000 expected, while during the week of 3.33 million continued unemployment claims occurred. Retail sales for March increased by 9.8%, exceeding the estimate closer to 6.1% while the Empire State Manufacturing Index was reported at 26.3, the consensus forecast of 20. industrial production for March grew by 1.4% , less than the estimated 2.7%. The National Association of Home Builders Index for April was reported at 83, slightly lower than the 84 expected.
Taiwan Semiconductor Manufacturing Co. see TSM,
profit increased by 19% in the first quarter of 2021 compared to the same period a year ago. Digital trends amplified by the COVID-19 pandemic have rapidly led to a rapid increase in chip demand over the past year, causing a worldwide shortage of semiconductors.
The Commission for Data Protection in Ireland has launched an investigation into Facebook FB,
Wednesday in response to reports that a dataset containing personal information regarding about 533 million users has been released. The regulator will investigate whether the social media giant has violated European Union protection rules.
TuSimple, an autonomous truck group in California, was announced on the Nasdaq. Linked to carmaker Volkswagen VOW,
and backed by the logistics company UPS UPS,
TuSimple will compete with self-driving projects of electric car manufacturer Tesla TSLA,
and Waymo, a division of Alphabet GOOGL,
A study by the University of Oxford found that blood clots are just as common with COVID-19 vaccines from the drug company Pfizer PFE,
and biotechnology Modern MRNA,
as it comes from the drug company AstraZeneca AZN,
a vaccine produced with the help of the university. The AstraZeneca vaccine has been scrutinized and discontinued in Denmark due to blood clots.
The markets
US shares DJIA,
SPX,
COMP,
was higher with the earnings season underway and bond yields under control. European equities flirt with new UKX records,
DAX,
PX1,
with the pan-European Stoxx 600 SXXP,
closed above the everyday high reached just last week. Asian stocks NIK,
HSI,
SHCOMP,
was more mixed.
The graph
Source: Morgan Stanley.
No, American businesses are not just flourishing money – as you might think by looking at the chart of the day, brought to our attention by the Irrelevant Investor blog. The graph, which is part of recent research by Morgan Stanley, reflects the rise in ‘intangible investments’ that do not appear in a company’s balance sheet, but rather in the income statement. These ‘expenses’, which include assets such as research and development, make companies appear unprofitable. This is an accounting thing.
Random reading
A Canadian lawmaker apologized after appearing naked in a virtual session of the House of Representatives.
A missing California hiker was found after a geography enthusiast used a mystery photo to reveal his location.
Need to Know starts early and is updated to the opening clock, but sign up here to have it delivered to your inbox once. The version by email will be sent out around 7:30 p.m.
Want more for the day ahead? Subscribe to The Barron’s Daily, a morning information session for investors, including exclusive comments from Barron’s and MarketWatch authors.