European stocks followed the global trend on Friday as a fresh round of misguided comments from Federal Reserve officials revived expectations that monetary policy will be tightened soon. The pan-European Stoxx 600 provisionally closed around 1% lower, with retail stocks leading the losses, down 2.3%, while almost all sectors and major bourses slipped into negative territory. On the data front, the German economy grew 2.7% in 2021 after slumping 4.6% in 2020 as semiconductor shortages weighed on the auto sector and further measures to rein in Covid-19 slowed the recovery in Europe’s largest economy.
Shares of major banks fell after their earnings reports on Friday, weighing on U.S. markets as Wall Street started the year lower for the second straight session. JPMorgan Chase, the largest U.S. bank by assets, reported profit and revenue that beat estimates, but shares fell more than 6%. Shares of Netflix rose more than 1% after announcing a price increase for U.S. and Canadian subscribers, helping the Nasdaq outperform Friday. Retail sales fell 1.9% in December, below expectations of economists surveyed by Dow Jones, who had expected a 0.1% decline.
This morning, contrary to market expectations, China’s central bank cut borrowing costs on its medium-term loans for the first time since April 2020 to cushion a potential slowdown. The People’s Bank of China (PBOC) said it would cut the interest rate on one-year medium-term loans worth 700 billion yuan ($110.19 billion) to some financial institutions by 10 basis points to 2.85% from 2.95% in previous operations.
JPMorgan shares fall 6% after CFO cuts guidance over ‘headwinds’
Shares of JPMorgan Chase fell Friday after the bank reported its smallest quarterly profit in nearly two years and the bank’s chief financial officer cut guidance for companywide earnings. Higher-than-expected expenses led to a 14% drop in fourth-quarter profit to $10.4 billion, while revenue was nearly apartment at $30.35 billion. JPMorgan said in its press release that it had a net gain of $1.8 billion from the release of provisions for credit losses that never materialized. Excluding that 47-cent-per-share increase, earnings would have been $2.86 per share. The bank’s shares fell 6.2%.
Citigroup shares slide after fourth-quarter profit drop
Citigroup shares fell more than 1% Friday after the banking giant reported a sharp drop in fourth-quarter profit. The company’s net income fell 26% to $3.2 billion. Citigroup blamed the sharp decline on an increase in expenses, adding that the results included a “pre-tax impact” of about $1.2 billion related to the sale of its consumer banking business in Asia. Citigroup reported an 18% year-over-year increase in operating expenses for the quarter to $13.5 billion. For 2021, Citigroup said net income nearly doubled from 2020 to $21.95 billion, while full-year revenue declined 5% to $71.88 billion.