Strong US data drive markets ahead of earnings season start

Positive US economic data which triggered re-pricing of equities as government bond yields rose, as well as easing of concerns about Italy’s budget deficit were global equities markets’ main drivers last week. The SP 500 extended losses 1% last week as rising bond yields made riskier investments – stocks relatively less attractive.

Hong Kong’s Hang Seng Index turned the worst performer among the major stock market indices last week, closing 4.4% lower. Among major currency pairs the biggest change was recorded for the Australian dollar vs US dollar: it slumped 2.2%.

US inflation report due on Thursday is the major economic update traders will watch most closely this week after jobs report on Friday indicated unemployment fell to 48-year low. Headline inflation is expected to decline to 2.4% in September from 2.7%, not a sufficient decline to affect Federal Reserve’s tightening policy stance. European Central Bank’s meeting minutes are another major report bound to attract trader’s attention this week after turmoil caused by Italy’s budget plans last week. And on Friday JPMorgan Chase, Citigroup and Wells Fargo kick off earnings season for US banks.