Marketmind: Earnings face the inflation test

By Kitco News / October 11, 2021 / www.kitco.com / Article Link

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 moreMeanwhile, 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.snapshotKey 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 Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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