US stocks had an up and down week, with most of the main indices ending modestly lower as the latest minutes of the US Federal Reserve signalled the central bank's determination to tackle mounting inflation.
The details of the Fed's policy meeting on 15 and 16 March showed the central bank planned to start reducing its balance sheet by $95 billion a month, potentially as early as May. This represents a reversal of the asset purchases which had previously helped to prop up the economy and markets.
There were also strong signals that half a percentage point interest rate hikes are on the way after the rate was increased by a quarter of a percentage point last month.
Elsewhere Ford (F:NYSE) and General Motors (GM:NYSE) came under pressure on weak vehicle sales amid chip shortages while shares in tech hardware firm HP (HPQ:NYSE) were in demand after billionaire investor Warren Buffett splashed out on a $4.2 billion stake.
Elon Musk certainly knows how to make headlines. Regulatory filings over the past week show the controversial entrepreneur to now be the largest shareholder in Twitter (TWTR:NYSE).
Having purchased a 9% stake (c73.5 million shares) in the social media platform founded by Jack Dorsey for about $3 billion, Musk has also taken a seat on the board (chief meme officer, as one wag wondered) and plans to make ‘significant improvements to Twitter in the coming months’.
The news sent the Twitterati into overdrive and the share price soaring 28%, its largest one-day gain ever. Speculation has inevitably emerged about Musk's intentions. His first move was to ask users if they'd like an edit button, the subject of hot debate in recent months, but others think pushing for a sale of the business might be the longer-term game plan.
US BANKS PREVIEW
As is tradition, the US banks are set to kick off the latest quarterly earnings season across the Atlantic. JP Morgan Chase (JPM) is up first on 13 April, with Citigroup (C:NYSE), Wells Fargo (WFC:NYSE), Goldman Sachs (GS:NYSE) and Morgan Stanley (MS:NYSE) all follow suit on 14 April. Bank of America (BAC:NYSE) reports on 18 April.
There will be a lot of focus on net interest income, a key measure of industry profitability, amid hopes their core lending operations can benefit in a rising interest rate environment. Higher rates should allow the banks to charge more for loans.
However, many of these institutions have large investment banking operations which will face a tough comparison with the first quarter of 2021 when they benefited from a significant volume of corporate transactions and buoyant market trading.
Banks' numbers a year ago were also flattered by funds being set aside for loan losses during the pandemic being released, with no repeat in prospect this time round.
