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Earnings and Macro

By Jonathen Chan (market analyst, CMC Markets and Stockbroking)

Market sentiments could face a bigger challenge this week. Major macros data around the globe is absent until Wednesday. The US 10 year bond yield is edging closer to 3.2%. Investor buying could be limited by a higher borrowing cost and less stimulative news. At the same time, greater scrutiny may be placed on US company profits as the corporate earnings reports season continues. However, a higher sensitivity in share prices to corporate profit could mean more buying if the company report could deliver growth. On the other hand, Investors may lean towards other sectors if tech shares remain under pressure. For instance, a higher support in banking shares is possible.

Currency markets may see more movements as macro data from the EU start on Wednesday. The action includes the regional inflation readings, the PMI data, and more importantly the EU refinancing rate announcement. On Thursday, more US data will follow. The US durable goods, employment data and GDP could provide a lift to the US dollar if a better economic outlook is confirmed. The movement of the Euro and British Pound may become increasingly sensitive to geopolitical factors such as Italy’s budget issue and Brexit talk gaining more headline exposure.

In another continent, China reported a slower GDP growth but higher Retail Sales data last Friday. The regional stock markets shook off recent weakness and rallied during the late session. The positive momentum could extend today after the Chinese government vowed to recover the country’s financial health and aim to support the private economy. In particular, the Hong Kong and Shanghai stock markets may see gains if local investors derive optimism from the government’s plan.

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