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America’s banks kick off earnings season with a bang

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

The busy earnings season kicks off in earnest this week — and investors already have plenty to celebrate.

A healthy US economy is boosting American banks despite lower interest rates, which hurt their lending profits. JPMorgan Chase, the biggest US bank, reported a record quarter on Tuesday that topped Wall Street’s forecasts, sending shares up 1.2%. Citigroup also beat expectations. The company’s stock rallied 1.6%.

Bucking the trend: Wells Fargo closed down more than 5%. The bank’s new CEO, Charles Scharf, said regulatory troubles following a string of scandals are consuming his attention, though his team is “beginning to develop a path” to improve the company’s financial results.

The results bode well for the rest of the week. Bank of America and Goldman Sachs are due to report Wednesday. Morgan Stanley will follow on Thursday.

Reassuring investors: the ongoing strength of the American consumer. JPMorgan Chase generated solid gains in deposits and an increase in revenue from auto loans and other consumer products. It also helps that banks have a clearer picture on interest rates moving forward.

“The US consumer remains in very strong shape,” JPMorgan CFO Jennifer Piepszak told analysts Tuesday. Though business spending remains “a bit soft,” sentiment is “certainly better” than it was six months ago, she added.

UBS on Wednesday said it had raised its expectations for US earnings growth this year. The Swiss bank thinks results will better reflect the strength of the American economy following a relative disconnect in 2019, pushing stocks higher.

“We see the upcoming reporting season marking a turning point after a period of weak profit growth for US companies,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

The US and China will sign a trade deal. But what’s in it?

President Donald Trump on Wednesday is expected to sign a preliminary trade deal with senior Chinese leaders — but the document in question is still under wraps, my CNN Business colleague Donna Borak reports.

The public absence of the text, estimated to be more than 80 pages long, opens up the door to a “knee-jerk” response by markets “if the final details from the signed deal underwhelm investors,” Han Tan, market analyst at FXTM, a currency broker, told clients Wednesday. Optimism, Tan noted, is “largely priced in.”

What we have: US and Chinese officials have repeatedly described the agreement in sweeping terms, citing promises by Beijing to go beyond prior commitments made on intellectual property theft and forcing US companies to hand over their technology, as well as a pledge from China to buy $200 billion in farm goods and other products made by the US over a two-year period.

The missing details of the deal have left a host of questions: Exactly what commitments did China make? How will the deal be enforced? When will it take effect? Will China change its laws? And how will either country determine if the other failed to comply with the terms?

The latest: Bloomberg reports that existing US tariffs on billions of dollars worth of Chinese imports are likely to stay in place until after the American presidential election. But Treasury Secretary Steven Mnuchin is pushing back on this, telling reporters that Trump will reassess after securing a “phase two” agreement.

What is clear: Despite an apparent truce, the fight between United States and China isn’t over yet.

Airbus has stolen Boeing’s throne

It’s official: Airbus, not Boeing, is now the top planemaker in the world.

Boeing, which reported final order numbers and deliveries for 2019 on Tuesday, reported more cancellations than new business in 2019. Orders for the year tumbled 74% to 243, while deliveries dropped 53% to 380.

That put Boeing far behind its European rival. Last week, Airbus reported record deliveries of 863 jets, up 8%. Orders grew by 2% to 768.

My CNN Business colleague Chris Isidore points out that Boeing had a particularly strong year in 2018 and it would have likely seen a slowdown in orders even without problems for the 737 Max plane, which was grounded following two crashes that killed 346 people. But the numbers also highlight the challenge facing Boeing once the Max gets approval to fly again.

Up next

Bank of America, BlackRock, Goldman Sachs and PNC report results before US markets open. The US Producer Price Index arrives at 8:30 a.m. ET.

Coming tomorrow: US retails sales for a busy December.

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