By Geoffrey Smith
Investing.com -- Oil prices tumble again as the U.S. Oil Fund ETF is forced to adjust its positions by the Chicago Mercantile Exchange. Europe's banks post sharp declines in profit as provisions jump. It's a monster day for earnings, with Alphabet (NASDAQ:GOOGL), Ford and Starbucks (NASDAQ:SBUX) coming after the bell, and Pepsi, 3M (NYSE:MMM) and Caterpillar (NYSE:CAT) early. And the Federal Reserve starts a two-day meeting. Here's what you need to know in financial markets on Tuesday, April 28th.
1. Oil tumbles on USO's repositioning
Crude oil prices tumbled again as the exchange-traded fund that concentrates much retail speculative interest in crude was forced to adjust its positioning by the Chicago Mercantile Exchange.
The United States Oil Fund, LP (NYSE:USO) said in an SEC filing on Monday that its positions in the first three contracts of the U.S. crude futures strip had been capped, and that it would consequently move its exposure further out along the strip.
As a result, the spread between the front-month June contract (down over 7% at $11.88 a barrel) and the July contract was widened to over $7 a barrel, while the December contract likewise trades some $9 above July.
The international benchmark Brent was also pressured by the arbitrage. It dipped briefly below $20 before rebounding vigorously to $23.48 by 6:30 AM ET (1030 GMT).
2. Europe's banks post big jump in provisions
Europe’s biggest banks put out a largely negative set of results for the first quarter, with loan loss provisions leaping at both HSBC (NYSE:HSBC) and Santander (MC:SAN).
HSBC, whose net profit halved due to it booking $3 billion of provision, also said it would put its plan to cut 35,000 jobs on hold due to the pandemic in an expensive gesture of social solidarity. Santander posted 1.6 billion euros of provisions as profit fell 82%, due largely to its U.K. unit, and the reduced value of its operations in Mexico and Brazil.
The big outlier was Swiss bank UBS (NYSE:UBS), whose net profit rose by 40% year-on-year as the pandemic triggered exceptional levels of activity in its wealth management division, the world’s largest.
3. Stocks set to open higher as more states eye reopening
U.S. stock markets are set to open higher, extending Monday’s gains after Texas and Ohio became the latest states to announce dates for gradually easing lockdown.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 301 points, or 1.3%, while the S&P 500 futures contract and the Nasdaq 100 contract were both up 1.1%.
The dollar was lower across the board as risk appetite improved. The dollar index, which tracks the greenback against a basket of developed market currencies, was down 0.5% at 99.45, while gold futures drifted slightly lower.
4. Earnings galore - Alphabet, Ford, Starbucks and more
It’s a huge day for corporate earnings, with Alphabet the biggest company to report – and also one of the last, coming after the closing bell.
Pepsico (NASDAQ:PEP) has already got the ball rolling with a surprise 4% drop in first-quarter earnings and the now familiar routine of dropping guidance for the year. Industrial heavyweights Caterpillar and 3M are among those next up, as are UPS (NYSE:UPS) and pharma giants Pfizer (NYSE:PFE) and Merck (NYSE:MRK).
Joining Alphabet after the bell are Starbucks, Mondelez (NASDAQ:MDLZ), Ford Motor (NYSE:F) and Brazilian mining giant Vale (NYSE:VALE).
In Europe overnight, oil giant BP (LON:BP) said net profit fell by two-thirds but the company chose to borrow heavily rather than cut its precious dividend. Gearing rose to a whopping 36%.
5. Fed meeting starts, consumer sentiment and house price data due
The Federal Reserve starts a two-day meeting later, although its conclusions won’t be out until Wednesday.
Sweden’s central bank earlier resisted the temptation to go back to negative interest rates although it hinted that it may have to in the coming months. The krona hit a seven-week high against both the euro and dollar.
The Conference Board’s consumer sentiment index is released at 10 AM, along with the Richmond Fed business survey and the Texas services sector survey. Before that at 8:30 AM the trade balance for March will be out, while the Case-Shiller house price index is released at 9 AM.