Bank earnings don’t impress as Wall St stays optimistic
Metlifecare is said to be meeting with fund managers.
Megabanks JPMorgan Chase and Wells Fargo sat out the broader rally on Wall Street as the lenders said the US economy showed its resilience through the Middle East conflict, following Goldman Sachs’ lead on Monday when investors picked up on its weak bond trading income.
US and European stock markets gained on renewed optimism a lasting peace will be found in the Middle East, with Iranian foreign minister Abbas Araghchi saying there had been progress and US President Donald Trump saying the right people wanted to make a deal.
Tech stocks were at the top of the leaderboard, with Amazon the biggest gainer on the Dow Jones Industrial Average after agreeing to buy satellite operator Globalstar, with Kiwi-born Rocket Lab among those rising in its orbit.
And deals are continuing through the current turmoil, with Australian media reporting that retirement village operator Metlifecare is about to start wooing fund managers ahead of a potential initial public offering, while New Zealand-born edtech Storypark – now owned by Potentia Capital – has agreed to buy Melbourne software firm Xap.
Back to fundamentals
Investors turned their focus to company fundamentals as earnings season picks up pace, with JPMorgan, Wells Fargo, Citigroup and BlackRock among those reporting in the US on Tuesday. Wells Fargo dropped 5.1% after its net interest income fell short of expectations, while JPMorgan was weaker after it said potential regulations would force it to hold US$20 billion of extra capital.
Citi rallied as it posted its best quarterly return on tangible common equity in five years and asset manager BlackRock was up 3.3% as investment fees surged.
Trading platform Robinhood led gainers on the S&P500, jumping 9.1% in late trading, after the major banks continued to report increased activity on markets.
Wall Street was in better heart on the day, with the Dow up 0.6% in late trading, the S&P500 gaining 1% and the tech-heavy Nasdaq Composite advancing 1.7%, amid growing optimism that the US and Iran will reach a peace deal. The Polymarket prediction market is pricing in a 62% chance of a lasting accord by the end of June, and the volatility index, known as Wall Street’s fear gauge, fell 3.6% to 18.43. Brent crude oil futures fell 4.3% to US$95.11 a barrel at 7am in Auckland.
“Investor risk appetite has been supported by reports that Iran is considering a pause in shipments through the Strait to help ease the path toward an agreement,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.
Amazon led the Dow higher, climbing 3.7% in late trading, after agreeing to buy satellite operator Globalstar for US$11.6 billion. Rocket Lab was up 2% in late trading at US$72.
Nvidia and Microsoft were among gainers, while Goldman Sachs recovered some of Monday’s decline, up 2.4% in late trading.
Corporate activity
Johnson & Johnson rose 1.1% after beating earnings expectations, while United Airlines and American Airlines rallied after Bloomberg reported United’s chief executive pitched a possible tie-up of the carriers.
Stock markets were stronger across the Atlantic, with the UK’s FTSE 100 up 0.3%, Germany’s DAX gaining 1.3% and France’s CAC 40 advancing 1.1%.
The kiwi dollar rose to 59.03 US cents at 7am from 58.71 cents yesterday, joining other risk-sensitive assets higher.
That upbeat mood is set to carry through to the antipodes, with futures pointing to a 0.4% gain for the S&P/ASX 200 index when trading opens across the Tasman.
Local data today include the Real Estate Institute of New Zealand’s monthly house sales figures. Automation systems maker Scott Technology is due to report its first-half result today, while kiwifruit grower Seeka is holding its annual meeting.
Utilities measurement firm ikeGPS will be in view as a new report by consumer group PowerLines estimated US lines companies are expected to spend US$1.4 trillion in the next five years to upgrade networks to meet the energy boom needed for the artificial intelligence expansion.
Meanwhile, The Australian newspaper’s Dataroom column reported Metlifecare is kicking off a round of meetings with investors ahead of a planned IPO on the NZX and ASX in the second half of the year, while the Australian Financial Review’s Street Talk column reported that Potentia-owned Storypark will double in size after agreeing to buy Melbourne edtech firm Xap.
Reporting by Paul McBeth. Image from Shlok Jethwa on Unsplash.
