EURGBP
Lloyds share price swayed side to side as investors reacted to the weak manufacturing and services data from the United Kingdom. The market also reacted to the earnings results from Credit Suisse, which set aside millions of dollars in provisions.
Earlier today, we received financial results from Credit Suisse, the second-biggest bank in Switzerland. The bank reported solid first quarter income of CHF1.31 billion. This was better than the estimated income of CHF997 million. The net bank’s return on equity rose by 13.1% compared to 7.8% a year before.
The bank results mirrored those of US banks, which reported their earnings last week. Their results showed an improvement in revenue. Similarly, these banks set aside billions of dollars in provisions.
In its results today, Credit Suisse said that it was holding more than $585 million as provisions. This was triple what analysts were expecting. The bank also took CHF 444 million to cover low asset prices.
The charges point to what is to come when Lloyds Bank releases its earnings on April 30. The situation is worse for Lloyds because it targets mostly retail clients. Worse, the bank was in trouble even before the current crisis. This is evidenced by its share price, which has dropped by more than 65% in the past five years.
Earlier today, we received terrible manufacturing and services data from the UK and the European Union in general. The data showed that the services PMI dropped to 12.3 in April from the previous 34.5. This is a difficult number for the UK because of how important the services sector is to the economy. The sector is responsible for more than 80% of the country’s GDP. Similarly, the manufacturing PMI declined to a low of 32.9.
These numbers show that the UK could be facing its worst economic recession in years. This will not be a good thing for UK banks, including Lloyds Bank.
Download our Q2 Market Global Market Outlook
Looking at the daily chart, Lloyds share price has been on a downward trend. The current price of £29.43 is slightly above the YTD low of £27.58. Also, we see that the price faced a major resistance at the 38.2% Fibonacci retracement level at £38.80 in March this year. Also, the price is below – by far – the 50-day and 100-day exponential moving averages. I expect the bearish trend to continue as the price attempts to test the YTD low of £27.58.
An alternative scenario is where the price attempts to retest the previous swing high at £33 ahead of the company’s earnings.