Market Sentiment Improves Amid Earnings Season

October 18, 2022 10:27

The fourth quarter started on a sour note as geopolitical tensions and recession fears triggered a risk-averse mood, but earnings season has started since then, focusing market participants’ attention on fundamentals.

While volatility remains high and a bearish mood persists in the stock and currency markets, the week started with better-than-expected third-quarter earnings reports from Bank of America (BAC), Charles Schwab and Bank of NY Mellon.

BAC announced revenues of 24.5 billion USD on the back of higher interest rate income, gaining from monetary policy tightening and interest rate hikes. Investment banking revenues declined due to a cautious approach to new ventures amid the technical recession in the US.

Mega-cap earnings reports coming in today include Johnson & Johnson (JNJ) with forecasted revenue of 23.46 billion USD; Roche Holding ADR (RHHBY) with revenues seen at 15.66 billion USD; Netflix (NFLX) revenues are forecasted at 7.85 billion, and Goldman Sachs (GS) with income forecast at 11.37 billion USD. While analysts' consensus can give an expert estimate, the actual results may be higher or lower than expected.

As earnings season injects some spirit into stock market sentiment, currency traders are preparing for several high-impact economic reports set for release this week.

Germany announces the ZEW Economic Sentiment Index for October, forecasted at the level of -63.4 compared with the previous month’s result of -61.9. Risks to economic growth and confidence have risen in Germany because of higher natural gas prices amid supply-side restrictions due to the war in Ukraine.

On Wednesday, the UK will release the red-flagged Consumer Price Index (CPI) report for September. Inflation is expected to have remained the same as August at the level of 9.9 percent, but there is uncertainty about this because of the considerable headwinds in the UK economy at the time of writing.

The Gilt market went through volatility that was only calmed by the Bank of England loosening monetary policy and extending its quantitative easing program. While the central bank has since ended its bond market operations, the fact that it blinked was not lost on the currency markets’ inflation and interest rate expectations.

Lastly, data from the US housing market is expected on Wednesday and Thursday with the announcements of Housing Starts, Building Permits, and Existing Home Sales for September. These are all seen as coming in lower than the previous results because of higher interest rates weighing on the mortgage market and investment sentiment.

Stay updated with the latest market events. Bookmark Admirals’ Economic Event Calendar.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.