Equities climb on upbeat start to US earnings

Asian and European markets rose Thursday, boosted by a healthy start to the US earnings season ahead of more big-name results, as investors also tracked global inflationary pressures.

Oil rebounded close to Monday’s multi-year peaks after the International Energy Agency lifted global demand forecasts -- and cited shortages of natural gas and coal that are sparking a switch to crude. “Today we can expect reports from a variety of banks including Wells Fargo, Morgan Stanley, Citigroup and Bank of America,” said XTB analyst Walid Koudmani.

“These results could set the stage for what to expect in the coming weeks of earnings season and could give an indication of how institutions performed recently, as rising costs and uncertainty in markets worried investors.” Traders followed a broadly positive lead from Wall Street after JP Morgan Chase third-quarter earnings beat expectations.

Delta Air Lines saw a profitable third quarter despite warning over the impact of fuel prices, while BlackRock posted better-than-expected results.

Inflation narrative

“Earnings season gives investors a chance to ignore some of the noise and market narratives and get into actual numbers,” added Markets.com analyst Neil Wilson.

“Only this time we expect the corporate reporting season to underline the inflation narrative.”

Traders are meanwhile bracing for the end of an era of cheap cash, as inflation continues to surge on the back of supply chain problems and improving demand.

After a year and a half of ultra-loose monetary policies from the world’s central banks, which helped spur a rebound from the pandemic collapse and send equities flying, concern about consistently high price rises is forcing officials to tighten their belts.

Several have already started -- including South Korea and New Zealand, with Singapore joining in on Thursday -- but all eyes are on the Federal Reserve, with minutes from its most recent meeting showing it plans to move either next month or December.

A higher-than-expected reading on US consumer inflation pushed the case for a November start to tapering its massive bond-buying programme, but the main question on traders’ lips is now when it will begin to hike interest rates.

“Wednesday’s still-elevated consumer price index marks about six months’ worth of hot inflation data -- suggesting that inflation is not as transitory as many investors previously expected,” said Nancy Davis of Quadratic Capital Management.

“The overall inflation story is being driven by supply-chain disruptions and a swift rise in prices, due to the labour shortage.”

On Thursday, China said factory-gate inflation had in September hit its highest level in a quarter of a century owing to a spike in commodity costs and rocketing demand as economies reopen.

And with China a crucial exporter to the world, there are concerns the rises will transfer to other economies.