Aurelia Butler

(Reuters) -Wells Fargo & Co on Friday reported a 50% decline in profit for the fourth quarter as the bank racked up more than $3 billion in costs related to a fake accounts scandal and boosted loan loss reserves for a potential economic slowdown.The bank’s shares were down 4% in premarket trade.Provision for credit losses was $957 million in the quarter, compared with a $452 million release a year earlier.Provision for credit losses in the quarter included a $397 million increase in the allowance for credit losses primarily reflecting loan growth, as well as a less favorable economic environment, the bank said.Though Wells Fargo (NYSE:WFC)’s operating losses were “one-offs” related to litigation and regulatory and customer remediation, its results were disappointing, said Thomas Hayes, chairman and managing member at Great Hill Capital. “Of the major banks, Wells is the weakest of the reports today. They continue to underwhelm,” he said. Banks are building up rainy day funds as U.S. Federal Reserve policymakers decide on the future path of interest rates.After aggressively raising interest rates in an attempt to bring soaring inflation to heel, Fed policymakers say they are encouraged by the recent slowing in jobs and wage growth that could temper inflation. The outlook for big U.S. banks has been further clouded by the Russia-Ukraine conflict and fading stimulus. Higher borrowing costs have also softened demand for mortgages and car loans, crimping banks’ revenues.Meanwhile, a slump in dealmaking has weighed on banks’ investment banking businesses, which had a blockbuster 2021.Wells Fargo is still working to contain the fallout from a six-year-old scandal over its sales practices that led to hefty fines and an asset cap imposed by the Fed on the lender’s ability to expand its balance sheet. In December, the U.S. Consumer Financial Protection Bureau hit Wells Fargo with the watchdog’s largest ever civil penalty as part of a $3.7 billion agreement to settle charges over widespread mismanagement of car loans, mortgages and bank accounts.The bank said its estimate of reasonable possible losses in the fourth quarter is around $1.4 billion, down from $3.7 billion as of the end of September.”I wouldn’t say we are done with all the regulatory work but what I would say is we put a lot of issues behind us over the last couple of quarters and you can see that come through in the reasonable possible loss estimate, said Wells Fargo Chief Financial Officer Mike Santomassimo on a media call with reporters. Overall, non-interest expenses rose to $16.2 billion from $13.2 billion a year earlier.In the fourth quarter, the bank posted $3.3 billion in operating losses related to litigation, customer remediation and regulatory matters associated with the scandal over its sales practices.The fourth-largest U.S. lender reported a profit of 67 cents per share for the quarter ended Dec. 31, compared with $1.38 per share a year earlier.Chief Executive Officer Charlie Scharf is working on fixing the bank’s problems after it spent billions on lawsuits and regulatory fines.As part of his turnaround plan, Scharf aims to cut costs, scale back Wells Fargo’s huge mortgage business and expand its investment banking business.”While our risk and regulatory work hasn’t always followed a straight line and we have more to do, we have made significant progress, and are moving forward,” Scharf said.Wells Fargo has struggled over the past few years to satisfy regulators that it has fixed its problems and repaid customers who were harmed by its aggressive sales practices.The company’s net-interest income rose 45% to $13.4 billion in the quarter.Wells Fargo’s total revenue fell to $19.7 billion from $20.9 billion a year earlier. More

“You don’t get more Goldilocks than that,” the report said of Thursday numbers that showed U.S. consumer prices dipped by 0.1% month on month and unemployment claims were a muted 205,000, a reference to something being “just right” as in the fairy tale. The lower CPI data offered hope that inflation was now on a sustained downward trend, which should allow the Federal Reserve to further scale back the pace of its interest rate increases next month. Bofa also pointed to the impact of China reopening its borders after COVID-19 restrictions, lower EU energy prices and encouraging U.S. fiscal and labour market data, as all factors behind the moves. The report found there were weekly flows into funds investing in bonds ($17.5bn), cash ($8.3bn), and stocks ($7.2bn), and out of gold ($0.4bn).BofA also said there were the largest inflow to investment grade bonds since July 21 ($10.4bn), and the largest inflow to emerging market debt and emerging market stocks since April 22 ($3.6bn). The analysts said the moves were a “classic January reversal” with the “2022 losers of crypto, (US Treasuries), China, credit (and) stocks smashing ’22 winners of cash (and)commodities”. Europe’s benchmark STOXX index is trading at nine month highs, Hong Kong’s Hang Seng Index is at a six month top, and even bitcoin hit its highest in two months after the U.S. inflation data. “Flows show the chase is on,” said Bofa More

European stocks edged higher and Wall Street futures slipped on Friday after US inflation eased further in December, boosting the chances of a smaller interest rate rise when the Federal Reserve meets later this month. The regional Stoxx Europe 600 added 0.4 per cent in mid day trading, London’s FTSE 100 gained 0.5 per cent and Germany’s Dax added 0.2 per cent. Contracts tracking Wall Street’s blue-chip S&P 500, meanwhile, were down 0.4 per cent, while those tracking the tech-heavy Nasdaq 100 shed 0.5 per cent ahead of the opening bell. The moves come after data on Thursday showed annual US inflation declined for the sixth consecutive month to 6.5 per cent, the lowest consumer price index reading in a year. Rates markets immediately priced in a higher probability that the Fed will slow the pace of its monetary tightening at its next meeting in three weeks, with a 0.25 percentage point rise now firmly expected to follow December’s half percentage point move.“The Fed is getting closer to the end of the rate hiking cycle, which we believe is likely by the end of the first quarter,” said analysts at UBS Global Wealth Management. Even so, the “tightness of the labour market” means rates are unlikely to fall any time soon, with the US unemployment rate at a 50-year low, jobs vacancy rates elevated and the quit rate — “which is correlated with wage growth” — too high to justify a so-called Fed pivot any time soon. Companies including Amazon, Meta, Twitter and Goldman Sachs have all begun to lay off workers, however, while figures from the Bureau of Labor Statistics show average hourly earnings rose by less than expected in December.A measure of the dollar’s strength against a basket of six other currencies fell 0.2 per cent on Friday, after declining 0.9 per cent in the previous session. The world’s de facto reserve currency has shed almost 10 per cent over the past three months.US government bonds continued to rally, with the yield on the two-year Treasury note, which is particularly sensitive to interest rate expectations, falling 0.02 percentage points to 4.11 per cent, down from a peak of 4.7 per cent in November. “Treasury yields tend to decline by 50 to 60 [basis points] on average once the Fed goes on hold, and with our final expected rate hike still over two months away, this rally seems somewhat premature,” said analysts at JPMorgan.Elsewhere in equity markets, Hong Kong’s Hang Seng index gained 1 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed shares added 1.4 per cent. Data out on Friday showed China’s exports suffered the sharpest fall in almost three years in December, declining 9.9 per cent on an annual basis in dollar terms. More

Investing.com — The dollar softens and bonds rise as markets bet on a pivot from the Federal Reserve later this year. JPMorgan, Citigroup and Bank of America kick off the fourth-quarter earnings season. Tesla hurts sentiment with another price cut, and the SEC charges Gemini and Genesis with illegally offering securities. And oil hits a 10-day high on a brighter outlook for the world economy. Here’s what you need to know in financial markets on Friday, 13th January.1. Dollar dips on Fed pivot hopes The dollar fell to its lowest level in seven months, while bond yields stabilized after falling sharply on Thursday, as another drop in U.S. headline inflation emboldened hopes of a quick end to interest rate hikes from the Federal Reserve, and even a first cut in the second half of the year.By 06:15 ET (11:15 GMT), the dollar index was down a little less than 0.1% at 102.20, with its strongest losses coming against a revitalized yen, reflecting the fact that the Bank of Japan has only recently started contemplating any tightening of its own monetary policy.The decline in the consumer price index was arguably less impressive than it seemed at first, owing nearly everything to a 9% drop in gasoline prices that can easily be reversed. However, analysts were nearly unanimous in seeing the numbers as proof that inflation has peaked. That should be reflected in the ‘inflation expectations’ component of the Michigan Consumer Sentiment survey due at 10:00 ET.2. Bank results kick off earnings seasonThe improvement in bond market sentiment has probably come too late for Wall Street’s finest to salvage something from the wreckage of 2022, but the turnaround in sentiment since the start of the year will perhaps put more weight on the outlooks given by JPMorgan (NYSE:JPM) boss Jamie Dimon and his peers when they report earnings before the bell.JPMorgan, Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC) all report early, with a high degree of uncertainty over how well they have negotiated the choppy markets in the last quarter of last year. Also of interest will be how much they raise their provisions against credit losses against a backdrop of a slowing economy.Those looking for silver linings can point to Blackrock (NYSE:BLK), which has already posted better-than-expected numbers despite announcing layoffs earlier in the week.3. Stocks set for weekly gain; Tesla hurts mood with fresh price cutsU.S. stock markets are set to open fractionally lower later, after advancing on Thursday in response to the inflation numbers, which were followed by more hints from Federal Reserve officials that the central bank may only raise the fed funds target range by 25 basis points at its February meeting.By 06:30 ET, Dow Jones futures were down 42 points, or 0.1%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.4%. The main cash indices had gained as much as 0.6% on Thursday and are set to close the week with gains of between 2% and 3.8%.One fly in the ointment may be Tesla (NASDAQ:TSLA) and the rest of the automotive industry, after the EV maker slashed its prices in the U.S. and Europe. The move will allow its Model 3 sedans and Model Y crossovers to qualify for U.S. federal tax credits and will help it shift inventory after it missed its delivery targets at the end of last year – albeit at the expense of profit margins. Tesla stock fell 5.2% in premarket and the news also dragged down European rivals Mercedes (ETR:MBGn), Volkswagen (ETR:VOWG_p) and Stellantis (EPA:STLA) (NYSE:STLA).  4. SEC charges Gemini, GenesisThe Securities and Exchanges Commission charged both Genesis and Gemini with illegally offering securities to U.S. customers, in another heavy blow to a crypto industry still reeling from the collapse of FTX.The SEC’s move had been expected, but further complicates efforts to unblock accounts at Genesis which suspended client withdrawals after losing money in the collapse of both FTX and the Terra/Luna collapse earlier in 2022.The move was criticized as “super lame” by Gemini co-owner Tyler Winklevoss, who, with his twin brother Cameron, own one of the biggest remaining cryptocurrency hoards. Those holdings may have to be at least partially liquidated if the SEC extracts a heavy settlement from Gemini.Elsewhere, Bulgarian-based crypto platform Nexo also ran into trouble, being raided by local authorities on suspicion of aiding money laundering.5. Oil hits 10-day high as dollar cheapensCrude oil prices hit their highest in 10 days as the dollar weakened amid hopes for an easier U.S. monetary policy that will allow other central banks around the world to give more support to their economies, too.The effect of the U.S. inflation figures outweighed that of weak Chinese trade data for December, which showed both imports and exports continuing to fall in year-on-year terms.By 06:50, U.S. crude futures were up 0.7% at $78.97 and Brent was up 0.7% at $84.60. The Baker Hughes report on drilling rigs and the CFTC’s positioning data close off the week later. More

LONDON (Reuters) – World stocks scaled one-month highs on Friday as hopes of inflation easing took hold, while the yen jumped to seven-month peaks and Japanese bond yields breached a central bank target as investors challenged its commitment to loose monetary policy.European shares rallied and the broad STOXX 600 index hit its highest since April, while Asian-Pacific shares outside Japan hit a new seven-month high and was headed for a third consecutive week of gains.U.S. stock futures dipped but sentiment generally was upbeat a day after data showed U.S. price pressures easing further. World stocks were set for the best start to the year in decades. Graphic: World stocks see stellar start to year https://fingfx.thomsonreuters.com/gfx/mkt/mopakjqdypa/Pasted%20image%201673606397958.png Japan grabbed the market spotlight as the yen shot up and benchmark 10-year government bond yields briefly breached the BOJ’s 0.5% ceiling on speculation that its yield curve control policy could be revised, or even abandoned, as early as next week’s policy meeting.A wave of emergency BOJ buying later reined the yield back in, but markets remained jumpy.The yen strengthened to 128.11 per dollar — its highest since late May. It was last up 0.7% and has rallied 6% in little more than three weeks since the BOJ stunned markets by widening the band around its 10-year bond (JGB) yield target.A newspaper report flagging the possibility of more flexibility has redoubled bets on a coming shift out of ultra-easy policy that seeks to pin yields near zero. The BOJ said it will conduct additional outright bond purchases on Monday, a move that should keep yields in check.”Japan has been the last bastion of low rates and you shouldn’t underestimate that it is a big deal if they change course,” said Nordea chief analyst Jan von Gerich.The BOJ will likely raise its inflation forecasts next week and debate whether further steps are needed, sources familiar with the bank’s thinking told Reuters.INFLATION OPTIMISMBeyond Japan, market sentiment was dominated by overnight U.S. December inflation data that landed more or less on consensus expectations. The annual pace of headline consumer price rises slowed to 6.5% in December from 7.1% in November.Investors responded by down-shifting expectations for U.S. interest rates. A Federal Reserve hike of 25 basis points rather than 50 next month is now anticipated, with futures markets pricing in rate cuts later this year.Against this backdrop, MSCI’s World Stock Index rallied to a one-month high and was set for its biggest weekly jump in two months. “Markets are too optimistic on two points. One is on the inflation trajectory,” said Eric Vanraes, a portfolio manager at Eric Sturdza Investments. “The second point is that equity markets want to believe that there won’t be a sharp recession and that’s not logical if we think the bond markets are anticipating easing at the end of the year.”U.S. earnings were in focus with JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C) and Wells Fargo (NYSE:WFC) & Co are forecast to report lower fourth-quarter profits before the opening bell.The dollar slipped broadly. The euro briefly rallied to a nine-month high of $1.0868 per and the risk-sensitive Australian dollar rose to a roughly five-month high at $0.6994.The yield on the 10-year U.S. Treasury yield briefly fell to 3.418%, its lowest since Dec 7. News that Britain’s economy unexpectedly eked out some modest growth in November supported sterling, which rallied 0.25% versus the dollar.Oil meanwhile extended gains, with Brent crude futures were last up around 1% at $84.89. [O/R]Elsewhere, South Korea’s central bank raised its policy interest rate by 25 basis points on Friday, as expected, and economists now think it might have reached the end of its hiking cycle. More