News updates from July 12: JPMorgan profits rise 25%; US small caps notch best week of 2024

US small cap stocks notched their best weekly gain in eight months as traders, encouraged by cooling inflation data in June, rotated into smaller companies that would benefit from interest rate cuts.

The Russell 2000 closed 1.1 per cent higher on Friday, taking its gain over the past five sessions to 6 per cent — the biggest weekly increase since November. The small-cap index had its best day of the year on Thursday, when traders raised bets for multiple rate cuts in 2024, with such a policy move likely to provide domestically-focused companies with relief and benefit businesses with a greater need for credit.

The tech-focused Nasdaq Composite rose 0.6 per cent on Friday. Its advance across the past five sessions marked its sixth consecutive weekly gain, the longest streak since a nine-week run at the end of 2023.

The S&P 500 added 0.6 per cent on the day. Four in five the of benchmark index’s members advanced on Friday, led by gains in the utilities and materials sectors.

US stocks were back at record highs as traders assessed earnings results from major lenders at the unofficial start of second-quarter earnings season.

The S&P 500 was up 1.2 per cent in Friday afternoon trading, on course for its biggest one-day jump since early May. The rally was broad — with nine in 10 of the benchmark index’s members rising — with the financial sector performing worst despite being in the black.

Shares in heavyweight banks JPMorgan Chase, Citigroup and Wells Fargo were all lower after they warned of financial stress among lower-income consumers.

The Nasdaq Composite added 1.4 per cent, with every Magnificent Seven group except Meta rising.

Short-dated Treasuries rallied, even as data showed US wholesale inflation was higher than expected in June. The yield on the two-year note fell 0.04 percentage points to 4.47 per cent, its lowest level since March 8.

Brittany Pettersen has become the latest Democrat on Capitol Hill to call for US President Joe Biden to drop out of the 2024 race, after his press conference on Thursday failed to stem concerns from lawmakers in his party. 

Pettersen, who represents a district in Colorado, asked Biden to “pass the torch to one of our many capable Democratic leaders so we have the best chance to defeat Donald Trump, who is the greatest threat to the foundation of this country that we have ever faced”, in a post on X on Friday.

She was the 18th Democrat in Congress to say Biden should step down since such calls began on July 2. 

Representatives Eric Sorensen, Scott Peters and Jim Himes called for Biden to drop out on Thursday after the president’s press conference.

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US stocks rose early on Friday, partially reversing a sharp sell-off in the previous session, as traders brushed off higher than expected wholesale inflation figures.

Wall Street’s S&P 500 gained 0.2 per cent, with interest rate sensitive real estate companies among the best performers. Shares in Citigroup, Wells Fargo and JPMorgan fell 1 per cent, 7 per cent and 2.2 per cent after the banks reported earnings earlier on Friday. The tech-dominated Nasdaq Composite gained 0.1 per cent. 

Both the S&P 500 and the Nasdaq slipped on Thursday as traders rotated into small-cap stocks after lower than forecast consumer price inflation in June. Data out on Friday, in contrast, showed producer prices rose by more than expected during the same month. 

A measure of the dollar’s strength against a basket of six major currencies fell 0.2 per cent. 

Unilever plans to cut a third of all office roles in Europe by the end of next year, as the company’s new chief executive forges ahead with his plan to boost growth at the struggling consumer goods giant.

The FTSE 100 company, which is under pressure from shareholders including activist investor Nelson Peltz, told senior executives on Wednesday that as many as 3,200 roles would be cut in Europe by the end of 2025, according to details of a company-wide call shared with the Financial Times.

The job cuts are part of Unilever’s “productivity programme” first announced in March that include slashing as many as 7,500 roles globally. The company employs 10,000 to 11,000 office-based staff in Europe.

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US wholesale inflation unexpectedly rose in June, contrasting with consumer prices data released yesterday that showed the rate of price growth fell more than expected. 

The producer price index, a leading indicator of inflation, rose 0.2 per cent last month, the labour department said on Friday. Analysts had forecast a 0.1 per cent month-on-month increase in the headline measure. 

The annualised rate climbed to 2.6 per cent, its highest level since March 2023, surpassing economists’ expectations of a 2.3 per cent reading. 

Core PPI, which excludes volatile food and energy prices, also rose in June by 0.4 per cent. Economists had expected a 0.2 per cent month-on-month jump.

Citigroup said quarterly profits rose 10 per cent from last year, even as the bank faced higher losses in its credit card business and a $136mn regulatory fine.

The bank earned a better than expected $3.2bn in the quarter. Revenue increased to more than $20bn, up from $19bn a year ago.

Citi’s corporate and investment bank was the biggest driver of profits for the second consecutive quarter, after a resurgence in dealmaking and debt offerings.

Chief executive Jane Fraser has revamped the leadership of the banking division, recruiting JPMorgan investment banking veteran Vis Raghavan to head the business.

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Wells Fargo’s profits fell slightly in the second quarter from a year ago, as the bank’s earnings showed signs of a slowing economy.

The bank said that demand for loans from corporate borrowers was “tepid” in the quarter. Wells Fargo’s overall average loans outstanding fell by $29bn, down 3 per cent from the same period a year ago.

But while lending slowed, Wells Fargo said revenue from investment banking and other businesses that generate fees was up 19 per cent in the quarter.

Overall, the bank earned $4.9bn, down less than 1 per cent from a year earlier, which was slightly better than analysts were expecting.

Wells Fargo’s shares fell as much as 5 per cent in pre-market trading.

AT&T suffered a huge hack earlier this year, with nearly all of its wireless customers affected, the US telecoms company revealed on Friday. 

Over 11 days in April, a “threat actor” accessed AT&T records of customer call and text interactions from a period of several months in 2022, as well as on January 2 2023, the company said in a filing. 

The records contained information on the telephone numbers that AT&T’s customers were interacting with, as well as “counts of those interactions, and aggregate call duration for a day or month”, according to the company.

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JPMorgan Chase’s profits rose 25 per cent in the second quarter, boosted by a long-awaited rebound in investment banking and a gain from its stake in credit card network Visa.

The Wall Street lender reported quarterly net income of $18.1bn, roughly in line with what analysts had expected.

“While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks,” JPMorgan chief executive Jamie Dimon said in a statement.

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The Kremlin has denied Russia plotted to assassinate the head of Europe’s largest ammunition manufacturer over his support for Ukraine.

Dmitry Peskov, president Vladimir Putin’s spokesman, said reports the US and Germany thwarted a Russian plan to kill Rheinmetall chief executive Armin Papperger “don’t have any serious arguments and are based on certain anonymous sources”, according to Interfax.

“This is all being served up in the style of yet more fakes, so you can’t take this news seriously,” Peskov told reporters on Friday.

The price of Brent crude, the international oil benchmark, rose 1 per cent on Friday after lower than expected US inflation data boosted the case for rate cuts later this year.

Brent crude advanced to $86.20 following data released on Thursday that showed US inflation hit 3 per cent in June, down from 3.3 per cent in May and below economists’ forecasts. West Texas Intermediate, the US benchmark, rose 1.1 per cent to $83.55 a barrel.

“We maintain our long-held view that Brent oil will average $84 in the third quarter and $83 for the year — year-to-date Brent has averaged $83.57 — before dropping into mid-$60s in 4Q25,” said JPMorgan analysts in a note to clients.

Banks: Analysts expect that when major US banks Citigroup, JPMorgan Chase and Wells Fargo release second-quarter earnings before the bell, they will report significant losses on loans marked as unrecoverable — known as “charge-offs”. But a bright spot for Citi and JPMorgan could be a recovery in investment banking fees, given the recent revival in dealmaking. BNY will also report results before the market opens.

Inflation: The producers’ price index, an inflation indicator that tracks wholesale prices, is expected to have risen 2.3 per cent on an annual basis last month, up from 2.2 per cent in May and compared with 1.1 per cent in the same period last year. The core reading, which excludes volatile food and energy costs, is forecast to come in at 2.5 per cent year-on-year in June, slightly higher than the 2.4 per cent the previous month.

Consumer sentiment: Economists polled by Reuters expect a small improvement in the University of Michigan’s consumer sentiment index, up to 68.5 from 68.2 the previous month. 

The Conservatives released 10,000 prisoners earlier than expected to help ease the jail capacity crisis, according to figures released ahead of the new Labour government’s next steps to reduce the prison population.

Figures published by the Ministry of Justice showed that thousands of prisoners were let out between October 17 and June 30. 

The scheme initially enabled certain prisoners to be released a maximum of 18 days prior to their release date. This was expanded to 35 days in March and 70 days from May 23.

Shabana Mahmood, justice secretary, will today set out plans to release several thousand non-violent offenders who served at least 40 per cent of their sentence, down from 50 per cent. 

Measures are expected to include individuals serving sentences of less than four years.

European stocks rose early on Friday as investors looked ahead to forthcoming US bank earnings season and producer prices data, a closely watched inflation gauge.

The region-wide Stoxx Europe 600 added 0.1 per cent, boosted by consumer cyclicals and healthcare stocks. The Cac 40 in Paris rose 0.5 per cent, Germany’s Dax was steady and the UK’s FTSE 100 rose 0.4 per cent. 

US banks Citigroup, JPMorgan and Wells Fargo all release their latest results later on Friday, with investors also awaiting US producer prices data, another measure of inflation.

Contracts tracking Wall Street’s S&P 500 and the Nasdaq 100 slipped ahead of the New York open following a sell-off in the previous session.

An Australian soldier and her husband have been charged with spying for Russia, in the country’s first espionage case since laws were revised six years ago.

Australian Federal Police said the two Russia-born citizens obtained defence-related material to share with Russian authorities.

The army private and her husband were arrested at their home in a suburb of Brisbane on Thursday.

Police alleged that the soldier took long-term leave to visit Russia and instructed her husband, who remained in Australia, on how to log on to her military account and email to extract information.

The case was the first under 2018 laws that carry a maximum penalty of 15 years’ imprisonment, police said.

Australia’s defence department said the soldier had been suspended from the military.

Big share price moves in Europe today include Swedish investment company Lifco, UK asset manager Ashmore and London-listed bootmaker Dr Martens:

• Lifco: Shares in the Swedish investment company led gains on the Stoxx 600 index, rising 9 per cent, after it said acquisitions helped to boost its second-quarter performance and it had the “financial scope” to make more. 

• Ashmore: Shares in the UK-based asset manager slipped 3.5 per cent after the emerging markets specialist reported another quarter of $2bn net outflows. 
  

  

• Dr Martens: Shares in the London-listed bootmaker climbed for a second consecutive day, gaining 4 per cent, after it soothed investors on Thursday by reporting that trading in the year-to-date was in line with its expectations. 

Four people have died after a boat trying to reach Britain from France capsized in the English Channel overnight, a spokesperson for the French maritime authorities said.

Dozens more people were rescued after the attempted crossing off the French coast near Boulogne-sur-Mer. The accident follows another similar incident in April.

It comes despite growing attempts by Britain and France to discourage the crossings and to crack down on people smugglers, including with greater police co-operation.

Ashmore has reported more outflows from its funds as risk-averse institutional investors continue to shy away from its emerging market strategies.

The London-listed asset manager suffered net outflows of $2bn in the three months to the end of June. Coupled with investment losses of $400mn, Ashmore’s assets under management shrunk by $2.4bn to $49.5bn, it said in a statement on Friday.

The results follow net outflows of $2bn in the previous quarter, continuing a trend of sizeable withdrawals against a backdrop of higher interest rates. 

Ashmore’s chief executive Mark Coombs contrasted the growth opportunities in emerging markets with “headwinds” facing the developed world.

“As the trajectories of emerging and developed countries continue to diverge, investor appetite for emerging markets exposure will improve and capital flows will follow,” he said.

A free vote on legalising assisted dying is unlikely to be held in the first years of the new Labour government, Sir Keir Starmer has signalled. 

The UK prime minister reiterated his pledge to “provide time” for legislation on the issue during the five-year parliament and recommitted to allowing a free vote on the proposal, as is common on matters of conscience. 

But Starmer stressed he had not made a commitment about when to offer parliamentary time for a private members’ bill on the subject.

“I’m not going back on the commitment I made, but we have got to set out priorities for the first year or so,” Starmer said during a trip to Washington for a Nato summit this week.

Asian markets diverged on Friday after cooler than expected US inflation data raised the prospects of interest rate cuts, with Chinese and Indian equities rising while markets in South Korea and Japan fell.

Hong Kong’s Hang Seng index led gains in the region as rate-sensitive real estate companies listed in the city rose. Interest rates in the territory move in lockstep with the Federal Reserve due to Hong Kong’s dollar peg.

Mainland China’s benchmark CSI 300 index edged up 0.1 per cent ahead of next week’s third plenum. India’s Nifty 50 index gained 0.9 per cent.

In currency markets the South Korean won led gains as is strengthened 0.5 per cent against the US dollar.

Arvind Kejriwal, a prominent Indian opposition leader, was granted interim bail by the country’s Supreme Court on Friday after his controversial arrest in March before national elections.

However, the chief minister of Delhi and leader of the Aam Aadmi party will remain in jail due to his arrest on another charge.

Kejriwal has called his incarceration — over allegations he headed an alcohol licensing scam — politically motivated and a sign of desperation by Prime Minister Narendra Modi’s Bharatiya Janata party.

Kejriwal was briefly released on bail to allow him to campaign during India’s election, in which Modi returned to power for a third consecutive term, but with his BJP shorn of its parliamentary majority.

Shares of Hong Kong companies exposed to the rate-sensitive real estate sector jumped on Friday after cooling US inflation data raised the likelihood of interest rate cuts.

Henderson Land added 6.9 per cent and Hang Lung Group rose by 4 per cent. Link Reit, the largest real estate investment trust in Asia, climbed 5.6 per cent.

Hong Kong’s interest rates move in tandem with the US because the city’s currency is pegged to the US dollar, forcing monetary policy to be restrictive despite a downturn in economic activity in the Chinese territory and hurting a once heady property sector.

China’s monthly trade surplus ballooned to almost $100bn in June as the country’s exports surged and weak domestic demand sapped imports.

The trade balance in US dollar terms rose to a $99.1bn surplus last month, ahead of forecasts for $85.3bn, data from the National Bureau of Statistics showed.

Exports in US dollar terms rose 8.6 per cent year on year, more than the 8 per cent median forecast from a Bloomberg poll of economists.

Imports unexpectedly declined 2.3 per cent year on year, a further sign of weak domestic demand in China. Bloomberg had forecast a 2.5 per cent increase.

In May the US raised tariffs on Chinese imports, many of which will come into effect from August.

Stock markets in Hong Kong rose on Friday after cooler than expected US inflation data increased the likelihood of rate cuts by the Federal Reserve.

That would allow the city’s monetary authority to follow suit as its currency is pegged to the dollar.

The Hang Seng index rose 1.6 per cent, with industries in the rate-sensitive property sector leading gains. All other major Asian bourses dropped in early trading.

In currency markets, Asian currencies broadly rose against the dollar, with the Korean won and Japanese yen leading gains with 0.4 per cent and 0.3 per cent rises, respectively.

Currencies in Malaysia, Indonesia and Sri Lanka weakened.

British Prime Minister Sir Keir Starmer has said he has discussed the need for a new “formal mechanism” for UK-EU security co-operation during bilateral meetings at a Nato summit in Washington.

He also announced on Thursday that Britain’s post-Brexit reset on the world stage under a Labour government has now begun and has been well received by allies. “There was a sense after Brexit that the UK has become too inward-looking,” he said.

Starmer told the Financial Times: “We can do more work with our EU partners when it comes to security. I think that’s good for us, and good for them. But there’s no formal mechanism, so that’s been discussed.”

US President Joe Biden, who is trailing Donald Trump in nearly all national and swing-state polls, pushed back on suggestions that he is poised to lose in November: “How accurate does anyone think the polls are these days?”

Biden insisted the campaign “hasn’t started in earnest yet”, and bristled at a question about what he would do if his campaign showed him polling to suggest his vice-president, Kamala Harris, would perform better in a hypothetical match-up with Trump.

Asked if such data would make him reconsider his candidacy, he replied: “No, unless they came back and said there is no way you can win . . . No one is saying that. No poll is saying that.”

Singapore’s economy grew 2.9 per cent year on year in the second quarter, slightly ahead of forecasts, steered by a boom in services and construction.

The two areas with the strongest growth were construction — “supported by an increase in public sector” output — and information, financial and professional services. Manufacturing figures also rebounded.

In May Singapore announced it would free up more power as it competes with regional neighbours to build artificial intelligence data centres.

The preliminary GDP figures were slightly ahead of polls from Reuters and Bloomberg forecasting 2.7 per cent growth.

Singapore’s benchmark Straits Times index is up 10.2 per cent for the year to date.

Events: Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk Yeol attend the Nato summit in Washington. Vietnam’s President To Lam pays a state visit to Cambodia.

Economic data: China publishes June trade figures as the country’s exporters try to fulfil orders before new tariffs come into effect. India announces its June consumer price index. May industrial production data from Japan, Malaysia and India are due.

Corporate updates: Muji owner Ryohin Keikaku reports quarterly earnings.

Joe Biden is set to field questions from reporters in a highly anticipated press conference tonight, a make-or-break moment for the US president as he seeks to reassure his own party that he is fit to take on Donald Trump.

The press conference at the end of this week’s Nato summit in Washington comes as a crisis over Biden’s candidacy engulfs the party.

It will also be a rare forum for Biden, who has held far fewer press conferences as president than any of his modern predecessors.

In the year to date, Biden has had no “solo” press conferences, and just three “joint” appearances with fellow world leaders, according to University of California, Santa Barbara data.

US President Joe Biden bungled the introduction of his Ukrainian counterpart at an event for the Ukraine Compact, referring to President Volodymyr Zelenskyy as “President Putin”.

“Ukraine will prevail in this war and we’ll stand with them every single step of the way. That’s what the Compact says loudly and clearly, he said.

“And now I want to hand it over to the president of Ukraine, who has as much courage as he has determination. Ladies and gentlemen, President Putin”, Biden added, invoking Russian President Vladimir Putin.

Biden quickly realised his mistake, and said: “President Putin? We’re going to beat President Putin,” before correcting himself to say Zelenskyy.

A US effort to deliver aid to the besieged Gaza Strip using a makeshift pier in the Mediterranean will soon be wound up after American troops tried and failed to reattach it to the shore this week.

The US installed the pier earlier this year after the UN warned that Israel’s war on Hamas in Gaza and restrictions on trucked aid supplies into the strip threatened widespread starvation across the enclave’s civilian population.

But bad weather halted the marine facility in late June, the third time waves had disrupted its operations since it was completed on May 17. US officials said on Thursday that they planned to end the project for good.

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A multi-day rally for the S&P 500 came to an end after cooler than expected inflation data for June pushed traders to bet on more interest rate cuts this year.

The benchmark index closed down 0.9 per cent on Thursday, ending a seven-day winning streak that had been its longest rally in 2024. The tech-heavy Nasdaq Composite closed down nearly 2 per cent.

Analysts explained that the move in equities was mostly a rotation out of mega-cap stocks such as big tech groups, and into smaller companies, which investors bet would benefit from lower interest rates.

The Russell 2000, which tracks smaller companies, rose 3.6 per cent, marking its best day since November. 

Cooler than expected inflation data for June sent Treasury yields lower and prompted traders to bet that the Federal Reserve would cut interest rates as soon as September.

The Bureau of Labor Statistics on Thursday reported that US inflation fell faster than forecast to 3 per cent in June, an encouraging sign for the Fed.

Traders in the futures market added to rate cut bets this year, with two or three reductions now priced in, and a first move in September now fully expected.

The two-year Treasury yield, which moves with interest rate expectations, fell to a four-month low of 4.49 per cent.