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While there is no obvious drama across financial markets this morning, the mood is undoubtedly a cautious one. Geopolitical tensions over North Korea and Syria and the prospect of earning some Wall Street banks later this week are making investors cagey. Even oil, whose prices shot highest since Donald Trump sent missiles into Syria is struggling for direction.
This relative paralysis in markets comes at a delicate juncture for the reflation trade, shorthand for the major push into equities that was helped by Donald Trump's election and his vow to deliver economic stimulus in the US. All of which makes the earnings of Wall Street Lenders, which begin on Thursday with JPMorgan, Citigroup, and then Wells Fargo, the potentially pivotal event for investors this week.
Bank shares have been the poster child for the reflation trade, with many of the big banks are enjoying gains of more than 20% in their stocks since the US presidential election. Should the banks disappoint lofty expectations, expect more cracks in the reflation trade to appear.
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