US Market Notes on Financials for 10 August

 

As per my previous post on 28 July, Financials and Energy sector has been the area I have noticed to be a laggard and would have a higher probability of a upward move.

If we look at the XLF (Financial ETF), it looks to have been consolidating for a period of time and during that period, big tech stocks have been making major moves. Looking at yesterday's movements, we can see that there is money flowing out from the Tech sector and moving into Energy and Financials. I will cover the Energy sector in a separate post. 

XLF Daily

Notably, Bank of America has been consolidating upwards since 20 July and JP Morgan has been consolidating sideways since 13 July. Looking at Bond yields, it is currently at its all time lows and it might potentially move up as it is considered a flight to safety during the whole US China tension. 

Looking at the daily chart of BAC, it is likely to touch the 200MA at 28 and the last time it did it went tumbling down so we will need to see if it can break out this time. It is technically a gap fill for the big fall in March if you can see from the charts. 

BAC Daily

The chart for JPM is looking pretty ok, with a sideway consolidation over several trading days and we would likely see a move soon if it continues to consolidate at this range. Similar to BAC, there is a gap fill in March and we would likely see resistance when it starts to move up to the 200MA. 

JPM Daily

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!

BANKS HSBC’s first-half profits miss expectations as bank sets aside more funds for loan losses

A pedestrian walks past illuminated signage for HSBC Holdings Plc displayed outside a bank branch in the Central district of Hong Kong, China.

Anthony Kwan | Bloomberg | Getty Images

HSBC reported a 65% fall in pre-tax profits for the first half of 2020 to $4.3 billion — missing analysts’ expectations.

Chief Executive Noel Quinn said the bank was “impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility.”

HSBC shares in Hong Kong tumbled by more than 3% when trading resumed after a lunch break. 

Source: CNBC

Not surprising for the results for EU banks. I specifically highlighted EU banks instead of the banking industry as a whole is because you will notice that the big US banks who reported their earnings did better as a whole in this pandemic. 

Primary reason for US banks is that they are pretty balanced in their business segment, Consumer banking, Corporate banking, Investment banking. In this crisis, consumer and corporate banking is taking a hit with retrenchments and bad sentiment all over the mainstream media. With companies going into bankruptcy, corporate activities are also likely slowing down. Since Feb the markets have been very volatile and this benefits the investment banking arm because with high volatility comes big volumes. With big volumes in US especially, you will notice that all the big US banks (JP Morgan, Bank of America) were able to negate the other business segments and the big US brokers (Morgan Stanley, Goldman) as well. However there are exceptions like Wells Fargo whose primary business is with consumer and corporate and you will notice that they suffered badly in this period. Even Warren Buffett has increased his stakes in Bank of America recently even though he is not a big fan of going beyond 10% of any holdings due to regulatory requirements that he needs to now adhere to. 

With this in mind, it is likely most of the EU banks are going to suffer quite badly as their investment banking arm is not as strong as the US counterparts (likely apart from Credit Suisse and UBS) and they may even exit this investment banking segment due to the cost of capital. This may result in further consolidation of power within the big US banks and unlikely to falter anytime soon as long as they do not do anything funny like what they did during 2007-2008.

Disclaimer: Whatever posted here is purely my personal view. It is not an inducement to trade and not responsible for any losses. Tips and News might just be rumors in the market. I take no responsibility for any gains or losses as a result of reading my analyses, judgement and opinions. Trade with care and diligence please!