'Surprised' If Fed Cuts Before December: BNP CIB | The Pulse with Francine Lacqua 04/29/24

Summary

In today's financial news roundup, HSBC's CEO Noel Quinn unexpectedly resigns after nearly five years, prompting a search for his successor at Europe's largest bank. The resignation comes amidst a mixed bag of earnings reports, with German automakers VW and Mercedes experiencing significant earnings drops, while Adidas shows increased profitability due to strong demand for its sneakers. The European market is also abuzz with GDP figures from Germany, France, and Italy, all showing better-than-expected growth, suggesting a potential recovery in the region. Meanwhile, the focus shifts to the Federal Reserve's upcoming meeting, where a more hawkish stance is anticipated, impacting the U.S. dollar and futures market. Additionally, the aviation sector faces challenges, with Lufthansa and Air France KLM planning cost-cutting measures after difficult first quarters. In the cryptocurrency space, the sentencing of Binance's ex-CEO Changpeng Zhao is set to take place, with implications for his fortune and the crypto exchange's future.

Takeaways

• 📉 HSBC CEO Noel Quinn unexpectedly steps down after nearly five years, prompting a search for a successor within and outside the bank.
• 🚗 German automakers face a challenging start to the year with earnings dropping 20% at VW and over 30% at Mercedes-Benz in Q1.
• 📈 French economic growth accelerates in Q1, raising hopes for the euro area to recover from a mild recession.
• 💹 More than 80% of US companies are beating expectations in early earnings reports, according to Bloomberg Intelligence.
• 💵 The German preliminary first quarter GDP shows a 0.2% rise, slightly better than expected.
• 🔍 Focus on cross-asset performance ahead of the Federal Reserve's meeting, with futures markets indicating a potential shift.
• 🌐 US futures, including S&P and NASDAQ, are nearly unchanged ahead of the Fed's expected more hawkish stance.
• 🤔 The search for HSBC's new CEO will consider candidates with strong ties to Asia, given the bank's strategic focus under Quinn.
• 🛫 European airlines Lufthansa and Air France KLM plan to cut costs after facing a difficult first quarter, reflecting broader challenges in the aviation sector.
• 👟 Adidas reports increased profitability in Q1, boosted by strong demand for sneakers, contrasting with the struggles in the automotive sector.
• 💰 Binance's ex-CEO Changpeng Zhao's sentencing hearing could make him the richest U.S. inmate ever, but his ownership in the company remains intact.

Q & A

Why is HSBC chief executive Noel Quinn unexpectedly stepping down?

Noel Quinn is stepping down after nearly five years in the job because he feels he has accomplished what he set out to do with the restructuring of the bank and is now interested in pursuing a portfolio career, which likely involves less travel than the role of HSBC CEO.

What was the reaction to Noel Quinn's sudden resignation?

The reaction to Noel Quinn's resignation was one of surprise, as there was no prior indication that he was considering stepping down. Analysts acknowledge the strong restructuring results under Quinn's leadership but are now cautiously optimistic about the future due to the unexpected nature of the announcement.

What challenges does HSBC face in finding a new CEO?

HSBC faces challenges in finding a new CEO with the right experience of running a large global bank and a deep understanding of the Asian, particularly the Chinese, market. The pool of available candidates with these specific qualifications is limited, making the search process potentially difficult.

How did the European automakers perform in the first quarter of the year?

European automakers experienced a difficult start to the year with earnings at Volkswagen (VW) tumbling by 20% and more than 30% at Mercedes in the first quarter.

What is the current economic outlook for the euro area?

The economic outlook for the euro area is showing signs of improvement, with French economic growth accelerating in the first quarter, which boosts hopes that the euro area can emerge from a mild recession.

What is the current state of the U.S. futures market ahead of the Fed's expected more hawkish stance?

U.S. futures, including S&P and NASDAQ futures, are practically unchanged as the market focuses not only on the movement of the dollar but also on the anticipation of the Fed's potentially more hawkish stance.

What was the preliminary first quarter GDP growth rate for Germany?

The preliminary first quarter GDP growth rate for Germany was slightly better than expected, with a 0.2% rise as opposed to the anticipated 0.1% rise.

How did the Italian first quarter GDP perform compared to estimates?

The Italian first quarter GDP was slightly above estimates, suggesting a better performance than what was projected.

What is the general trend in U.S. earnings based on early reporting season results?

The early results from the U.S. reporting season suggest that more than 80% of companies are beating expectations, indicating a strong performance despite the stage of the economic cycle.

What is the current status of the Bloomberg dollar index?

The Bloomberg dollar index is at 1261, reflecting the current strength of the U.S. dollar in the foreign exchange markets.

What is the potential impact of a strong U.S. economy and high Fed rates on emerging market currencies?

The strength of the U.S. economy and the maintenance of high interest rates by the Fed can lead to a stronger dollar, which may put pressure on emerging market currencies, especially those with low yields, reducing their attractiveness and potentially leading to capital outflows.