Equity rally at risk ahead of CPI & earnings

Chris Beauchamp IG

Stock markets are broadly in the red this afternoon, with caution prevailing ahead of earnings season and US CPI this week.

Stock rally at risk ahead of reporting season
FTSE 100 unmoved by reopening of UK economy
US CPI also a key point for the week

After a good week, equities are looking a little more hesitant today, with caution prevailing as markets await the start of US earnings season. The prospect of a steady flow of corporate updates offers at least a welcome change from the stimulus & yields focus of the past two months, but with markets having already rallied hard there are understandable fears that the figures will not meet expectations, giving investors an excuse to cut back on risk. The reopening of shops and pubs across the UK has not produced much of a reaction in the FTSE, which has edged lower throughout the day, while curiously European markets have retained more of their poise even as the continent contemplates the extension of lockdowns in places such as Germany.

US markets will be the ‘tell’ for investors this week, and tomorrow’s inflation reading will be closely-watched. After last week’s PPI bounce the market is on notice for further signs of inflation that will test the Fed’s resolve. Again, given the strength in stocks over the past few weeks the figure may have more impact than at other times.

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Chris Beauchamp

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