5 Things You Need to Know to Start Your Day: Americas

Good morning. Big banks kick off the quarterly earnings season, commodities markets are getting lively and investors pull money from US larg [View in browser]( [Bloomberg]( Good morning. Big banks kick off the quarterly earnings season, commodities markets are getting lively and investors pull money from US large caps. Here’s what people are talking about. — [Sofia Horta e Costa]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Bank earnings Earnings season has arrived, with major Wall Street banks Citigroup, JPMorgan and Wells Fargo on the schedule today. Investors will be closely parsing their outlooks and looking for commentary around key profit drivers. With traders predicting far fewer interest rate cuts from the Federal Reserve than anticipated at the start of 2024, analysts expect some larger banks [will increase this year’s guidance]( for net interest income. Still, bank bosses could be reticent to boost their outlooks while the rate picture remains in flux. Meanwhile, the Wall Street Journal reported that Morgan Stanley, which will update investors on its financials next week, [is facing scrutiny]( from US regulators in its wealth unit. Commodities boom It’s all happening in the commodities market. Gold appears unstoppable and has hit a [fresh record](, copper has reached the highest level since [June 2022]( while zinc is trading at the highest level in a year. Iron ore is headed for its [best week in two years]( and even oil is resuming gains, with Brent climbing above $90 a barrel. Oil prices held gains even after the International Energy Agency cut its forecast for demand this year and estimated even slower growth in 2025. Markets right now While the rally in commodities is helping European stocks charge higher, futures on both the S&P 500 and the Nasdaq 100 are [pointing to a weaker open on Wall Stree](t. The dollar is the big outperformer today and bonds are rallying, with the 10-year Treasury yield dropping five basis points after a brutal two days. Earnings season will quickly become the dominant force in the market, though, as investors assess whether profit growth is strong enough to justify equity prices. Analysts project S&P 500 members will show 3.8% annual growth in earnings per share for the first-quarter, while profits for the “Magnificent Seven” cohort of Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — are on course to rise 38%. Record cash bet One UK-based asset manager is making [its biggest-ever bet on cash](. Two-thirds of the almost $28 billion Ruffer LLP oversees sits in cash, with the income from that stash being funneled into insurance policies that will profit in the event of a big decline in markets. While the firm’s caution is particularly extreme, investors globally appear to be losing their conviction that the equity-market rally will continue. Bank of America’s latest Flow Show report showed stock funds suffered almost $20 billion in outflows in a week, the second-largest drawdown of the year. Some $17 billion of that came out of US equity funds in particular, where large caps saw their biggest outflows since late 2022. And half a billion dollars went into cash. Time to diverge Bets are growing that the Fed and the European Central Bank will go at their own speeds on interest-rate cuts. That’s weighing on the euro, which today dropped to the [weakest level against the dollar]( in five months, reviving talk of [euro-dollar parity](. And as traders tone down expectations for a Fed cut, recent losses in the government bond market are [dashing hopes]( that last year’s gains will continue. Commenting on the differences between Europe and the US, ECB Governing Council member Yannis Stournaras told my colleagues that “now it’s time to [diverge](” on policy. That’s after ECB President Christine Lagarde said the bank was not Fed-dependent. Bank of England policymaker Megan Greene also remarked on the gap between economies across the Atlantic, calling the US consumer [“relentless.”]( What we’ve been reading This is what’s caught our eye over the past 24 hours. - Apple [is overhauling]( its entire Mac line with new processors. - Chinese exports dropped [far more than expected]( in March. - The UK’s FTSE 100 is heading for a [record close](. - President Joe Biden [cancels $7 billion]( in student debt. - Cathie Wood says Ark Venture Fund [holds a stake]( in OpenAI. - [Hedge fund copycats]( — alternative UCITS — face a reckoning. - There’s a scramble for[finance professionals]( in India. And finally, here's what Katie’s interested in this morning This week’s big call came from State Street Global Advisors. The asset manager expects the Federal Reserve to unleash a half-point cut at the central bank’s June meeting, en route to delivering a total of 150 basis points of easing in 2024. The logic is two-fold: not only is the US economy not as strong as it seems — signals such as credit card delinquencies point to a second-half downturn — but the Fed will likely want to front-load cuts ahead of November’s presidential election. “The market is underplaying the likelihood of deeper cuts,” Lori Heinel, State Street’s Boston-based chief investment officer, told Bloomberg’s Alice Atkins. “There’s a lot to suggest that this is still a very fragile recovery despite the fact it continues to look resilient on the surface.” That call — printed Tuesday — may seem like fantasy following Wednesday’s release of March inflation figures, which surprised to the upside across the board for the third straight month. Wall Street has been quick to recalibrate amid a barrage of strong data: fewer than two Fed cuts are priced in for 2024, compared to six in January. Economists from Goldman Sachs to Deutsche Bank to Bank of America have pushed back their forecasts for cuts. Katie Greifeld is a cross-asset reporter for Bloomberg in New York. Follow her on X [@kgreifeld]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. 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