By Geoffrey Smith
Investing.com -- Apple (NASDAQ:AAPL)'s 5G iPhones don't quite match expectations, bank earnings continue to roll in from Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS), China's stock market hits a new landmark and oil prices struggle to reclaim the $40 level. Here's what you need to know in financial markets on Wednesday, October 14th.
1. Apple's new iPhones
Apple’s 5G iPhone launch fell short of optimists’ hopes, as the company admitted that much of its increased functionality will be of little immediate benefit to U.S. customers, owing to the slow roll-out of 5G networks.
Apple stock stabilized in premarket trading after falling 2.7% on Tuesday as the new product launch unfurled. The company’s restrained pricing of its four new models had analysts concerned that gross margins may suffer.
Elsewhere, ASML, the Dutch company whose machines allow chipmakers to print the new 5G chips, reported third-quarter earnings well ahead of expectations and guided for another year of growth well over 10% in 2021. Both companies will have to navigate the potential fallout of any further worsening in U.S.-China relations.
2. Chinese stocks hit landmark
China’s stock market passed the $10 trillion valuation mark for the first time, a testimony to the strength of its tech companies and the size of the domestic market that they enjoy, as well as to the country’s relative success in fighting the Covid-19 virus.
China is the only major economy in the world set to avoid contraction this year, according to the International Monetary Fund, which predicted growth of 1.9% for it in its updated forecasts that were released on Tuesday.
However, that hasn’t stopped individual companies and sectors running into trouble: Evergrande (HK:3333), the country’s biggest real estate developer, saw its shares in Hong Kong fall 16% after it failed to raise as much as hoped through a capital increase. Investors are increasingly concerned about a wall of maturing debt, and its 2025 dollar-denominated bonds now trade at only 75c on the dollar, implying high expectations of a debt restructuring.
3. U.S. stocks set to drift lower; bank results still in focus
U.S. stock markets are set to drift lower again, having snapped a four-day winning streak on Tuesday under pressure from various sources. In addition to the continued stimulus deadlock and its near-term effect on the economy, there were also setbacks in the hunt for a Covid-19 vaccine, as well as bank earnings that were less reassuring than they seemed at first glance. Late on Tuesday, Eli Lilly (NYSE:LLY) followed Johnson & Johnson (NYSE:JNJ) in suspending its Covid-19 drug trial due to an adverse event.
By 6:20 AM ET (1020 GMT), Dow 30 futures were down 11 points, or less than 0.1%, while S&P 500 Futures were down 0.2% and NASDAQ Futures were down 0.1%.
Banks are set to be in the limelight again today, with Wells Fargo, Goldman Sachs and Bank of America all reporting, along with PNC Financial (NYSE:PNC) and US Bancorp (NYSE:USB).
United Airlines' results will also be scrutinized after Delta missed expectations on Tuesday.
4. IMF prepares to scare the bond markets
The run up to the International Monetary Fund’s fall meeting continues with the release of the IMF’s fiscal monitor, which will chart the likely course of budget deficits next year in the wake of the pandemic.
It’s also the occasion for a welter of speeches from central bankers, including ECB President Christine Lagarde.
The IMF said on Tuesday that it expects the pandemic to hit emerging markets, excluding China, harder than advanced ones, with a cumulative loss of output of around 8.1% between the start of this year and the end of 2021.
5. Oil struggles to hold above $40; API data due
Oil prices continued to struggle to hold above the $40 a barrel level overnight, after last week’s supply constraints faded into the memory.
By 6:20, U.S. crude futures were down 0.5% at $39.99 a barrel, while the international benchmark Brent was down 0.4% at $42.28 a barrel.
At 4:30 PM ET, the American Petroleum Institute will publish its estimate for last week’s inventories in the U.S. Analysts expect the government data, due on Thursday this week because of the Columbus Day holiday, to show a decline of 3.39 million barrels in crude stockpiles last week.