Higher than expected US jobless claims failed to raise stimulus expectations in overnight trading. Instead of rallying on the “bad news is good news” dynamic, stocks fell and the global bond sell-off resumed. Despite US Federal Reserve reassurances, it appears inflation concerns are stalking markets.
A falling US dollar and gold prices plumbing 7 month lows suggests there was little appetite for safe havens. Instead, it is a stronger growth outlook and its potential impact on monetary policy that explains the falls in both stocks and bonds. US producer prices shocked analysts this week, coming in well ahead of forecasts, and surging retail sales may mean consumer prices will rise faster than forecast. UK consumer and producer prices also rose more sharply than expected.
A data dump over the next 24 hours speaks directly to these market concerns. Japan, Germany, France and Italy all release inflation data. Any further upside surprises could bring an acceleration of the bond selling that is lifting interest rates and steepening yield curves. An ongoing lift in borrowing costs would be increasingly difficult for share markets to ignore.
US corporate reporting is now more than 80% complete. Overall sales and earnings growth are ahead of forecasts, but the absolute numbers are reasonably pallid at 2.5% and 6% respectively. Australian companies yet to report today include Goodman Group and Vocus. Cochlear and Cleanaway have delivered above consensus earnings, while shareholders in QBE and Inghams could be disappointed by the numbers presented by management today.