A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 9, 2021. REUTERS/Andrew Kelly/File Photo

Oct 11 – A look at the day ahead from Danilo Masoni.

After weeks of debate about the supposedly transitory nature of higher inflation and its potential monetary policy implications, markets are about to find out how rising input costs impacted companies during the third 2021 quarter.

As the reporting season kicks off in earnest from this week, commodity price rises, labour shortages and supply bottlenecks will be the main story, taking over from the absolute recovery narrative of the previous two quarters. But with world stocks down as much as 6% from last month’s record highs, it’s anyone’s guess whether the margin squeeze is already priced in.

Asia started Monday on the upside but European and U.S. equity futures suggest some caution, possibly as oil prices extended their multi-week gains, pushing Brent crude to new three-year highs.

Still, investors may be coming to terms with a more moderate economic growth pace. Nineteen S&P 500 firms report earnings this week starting with the big banks; Refinitiv IBES forecasts profit growth at 30% this quarter, down from 96% in the previous three-month period.

Companies may also find it harder in future to engage in tax arbitrage — a common practice in particular among tech and pharma firms — after 136 nations agreed on Friday to implement a 15% minimum tax rate on big firms. read more

Meanwhile, hawkish central bank noise continues. Bank of England policymaker Michael Saunders told households to get ready for “significantly earlier” interest rate rises. He spoke shortly after BoE Governor Andrew Bailey said above-target inflation was concerning and had to be managed read more .

A Polish rate setter too said last week’s surprise rate hike was the beginning of normalising monetary policy.

snapshot
snapshot

Key developments that should provide more direction to markets on Monday:

* Japan households expect inflation to pick up – BOJ survey read more

* Goldman cuts forecast for U.S. economic growth in 2021 and 2022 read more

*Chinese developer Modern Land asks to delay bond repayment – WSJ

* Yellen confident U.S. Congress will pass minimum global corporate tax read more

* ECB Board Member Frank Elderson, Philip Lane

* World Bank/IMF meetings

* Fed speakers: Chicago Fed President Charles EvansReporting by Danilo Masoni; editing by Sujata Rao

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/business/earnings-face-inflation-test-2021-10-11/

You May Also Like

Empathy bootcamp? UK banks seek payback on $105 bln COVID loans

As payback time approaches for more than 75 billion pounds ($104 billion) of emergency state-backed loans, Britain’s banks must tread a delicate path with businesses propped up during the pandemic.

Dollar hits two-month highs on Fed’s hawkish surprise; kiwi climbs after GDP

The dollar rose to its highest level in almost two months versus major peers on Thursday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy. read more

South Korea’s youth debt binge shows no sign of slowing as rate hike looms

When South Korea announced new lending curbs last month, Joe Park, a 34-year-old grocery chain purchasing manager, scrambled to borrow more money before the tighter rules took effect.