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Inflation week

Inflation week

Asia Pacific markets are looking at a sluggish start to the week. On Friday night European and US stock indices fell, bonds came under pressure and gold slipped below US $1,500 an ounce. The cross asset-class weakness suggests some concern that the impact of central bank support is in question.

The inflation reads due this week are one cause for caution. After China’s annualised rate of inflation came in higher than expected last week, analysts will pay close attention to CPI data from the US, UK, Germany and France this week. Although not high on the market agenda, evidence of a globally co-ordinated upswing in inflation would curtail the ability of central banks to maintain an accommodative stance. At the same time a pick-up in prices points to better growth prospects, making market reactions hard to predict.

The US corporate reporting season is close to done. Growth in Healthcare and Telco earnings is offset by weakness in Materials, Technology and Consumer Goods, and it’s Iikely this will be the second quarter in a row of negative earnings for the S&P500.

JB HiFi (JBH) has once again confounded the short sellers, delivering 7.1% profit growth and $1.42 dividend for the full year. Day traders are on alert for a short squeeze. Property Group GPT saw earnings drop 52%, slightly better than expected. Ansell and Bendigo Banks also saw bottom line pressures. However Ansell management posted a positive outlook that could find shareholder support.

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