Caution gripped share markets on Monday as investors braced for a U.S. inflation report that could force another super-sized hike in interest rates and the start of an earnings season in which profits will be under pressure.

An upbeat U.S. June payrolls report already has the market wagering heavily on a rise of 75 basis points from the Federal Reserve, sending bond yields and the dollar higher.

Underlining the global nature of the inflation challenge, central banks in Canada and New Zealand are expected to tighten further this week.
While Wall Street did eke out some gains last week, the market mood will be tested by earnings from JPMorgan and Morgan Stanley on Thursday, with Citigroup and Wells Fargo the day after.

“Consensus expects 2Q S&P 500 EPS (earnings per share) growth of just +6% year/year,” says Goldman Sachs analyst David J. Kostin. “While firms will likely clear this low bar, we expect cautious commentary will prompt cuts to forward estimates.” – Reuters