Weekly Equities Outlook: Lloyds, JP Morgan, Tesco

Lloyds, BoE rate decision

The BoE will announce its interest rate decision on Thursday. The central bank is expected to leave rates unchanged at 3.75% as policymakers weigh the inflationary impact of the Iran conflict against a slowing UK economy and weakening labour market.

Markets are not fully pricing in another rate hike this year, reflecting concerns over stagnant growth. However, inflation remains above the Bank's 2% target and is expected to tick higher in Wednesday's CPI report, meaning policymakers may be reluctant to rule out further tightening.

As a result, investors will focus less on the rate decision itself and more on the vote split and Governor Andrew Bailey's guidance. Any indication that more MPC members are leaning towards tighter policy could shift expectations for rates later this year.

The banking sector will be particularly sensitive to the outcome. Higher interest rates generally support profitability by widening lending margins, especially for domestically focused lenders.

Lloyds, with its large exposure to UK mortgages and consumer lending, is often viewed as one of the purest plays on the UK economy. A more hawkish-than-expected Bank of England could therefore provide support for the shares.

How to trade Lloyds

Lloyds is attempting to break out of a symmetrical triangle pattern. The price has risen above falling trendline resistance and is testing resistance at 101.

A break above this level would bring 105, the April high, into focus, followed by the record high at 112.

Support can be seen at 100, followed by the 50-day SMA at 99. A break below 96.50, the June low, would create a lower low and expose 93, the May low, ahead of the 200-day SMA.

JPMorgan, Federal Reserve Decision:

U.S. banks will also be in focus ahead of the Federal Reserve's interest rate decision on June 18, the first under Chair Kevin Warsh.

The Fed is widely expected to leave rates unchanged. However, policymakers could adopt a more hawkish tone after recent data pointed to persistent inflation and a resilient labour market.

The latest non-farm payroll report marked a third consecutive month of solid job growth, while CPI accelerated to a three-year high of 4.2%. Inflation remains well above the Fed's target, reducing the urgency for policymakers to signal rate cuts.

Markets currently price around a 70% probability of a rate hike before year-end. Any shift towards a more hawkish stance could push Treasury yields higher and support bank earnings expectations.

Banks tend to perform well when rates remain elevated and economic activity remains resilient, as loan demand and net interest income hold up.

How to trade JPMorgan

JPMorgan is breaking out of a symmetrical triangle pattern, while the 50-day SMA has crossed above the 200-day SMA in a bullish golden-cross signal.

Buyers will look towards 324, the February high. A break above this level would bring the record high at 335 into focus.

Support can be seen at 312, near trendline support, followed by 304, the 200-day SMA. A break below 295 would create a lower low and weaken the bullish outlook.

Tesco Q1 Trading Statement

Tesco will release its Q1 trading update on June 18, with investors looking for evidence that the retailer can continue gaining market share despite pressure on UK consumers.

Last year, sales rose 4.3%, supported by market share gains and resilient demand. However, higher employment costs weighed on margins, making profitability a key area of focus.

The challenge for Tesco is that elevated energy prices and a slowing economy could place additional strain on household budgets. While this may encourage consumers to trade down to cheaper products, Tesco's scale and pricing power should help it remain competitive against rivals.

Investors will be watching whether market share gains continue and whether management maintains its full-year profit guidance of £3.0bn to £3.3bn. A resilient update would reinforce the view that Tesco remains one of the stronger defensive names in the UK market.

How to trade the TSCO update

Tesco is attempting to break out of a symmetrical triangle pattern. The price has recovered from the 430 low and risen above the 250-day SMA to test trendline resistance at 476.

A break above this level would create a higher high and open the door towards 486, the April high, followed by the record high at 497.

Support can be seen at the 50-day SMA at 462 and the 200-day SMA at 445. A break below 430 would create a lower low and weaken the medium-term outlook.