Markets Turn Defensive Ahead of Inflation and Earnings

Markets are starting the week on a more cautious footing as renewed US-Iran skirmishes over the weekend have lifted energy prices and reinforced geopolitical uncertainty. Investors also appear to be positioning defensively ahead of this week’s US inflation data and congressional testimony from Fed Chair Warsh, with higher Treasury yields weighing on risk appetite. Cryptocurrencies and AI-related stocks are extending their recent pullback in early trading.

There are no major economic or earnings reports this morning.

US equity futures are pointing lower, with NASDAQ futures down 1.0% and Dow futures off 0.1%.
Overseas markets were mixed overnight. In Asia, Japan’s Nikkei declined 1.9%, Shanghai fell 2.0%, and South Korea dropped 9.0%, while Hong Kong’s Hang Seng edged up 0.2%. In Europe, Germany’s DAX is up 0.1%, while London’s FTSE is down 0.2%.

Commodity markets are seeing renewed strength in energy. Crude Oil is up 3.3% and gasoline has gained 2.5%. Copper is higher by 0.5%, while precious metals are weaker with Gold down 1.2% and Silver off 2.0%.

In fixed income, the US 10-year Treasury yield is holding near 4.55%, while the 30-year yield remains steady around 5.05%. The US Dollar is mixed, strengthening against metals and cryptocurrencies while trading little changed against the major currencies. The euro is up 0.1% and the Canadian Dollar has also gained 0.1%.

Looking ahead, earnings season resumes Tuesday with results from Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Goldman Sachs. Morgan Stanley, BlackRock and United Airlines report Wednesday, followed by Netflix and Alcoa on Thursday and Travelers on Friday.

The Bank of Canada is widely expected to leave its benchmark interest rate unchanged at 2.25% on Wednesday. Investors will also be watching Fed Chair Warsh’s testimony before Congress on Tuesday and Wednesday, alongside a busy economic calendar that includes Chinese trade data Tuesday, Chinese GDP and retail sales Wednesday, US consumer prices Tuesday, producer prices Wednesday, and retail sales Thursday.

Shares of Goldman Sachs, Aritzia and Delta Air Lines are held in some portfolios managed by SIA Wealth Management.

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