As earnings go, so goes the world economy

Central bankers are paying attention. U.S. Federal Reserve Chairman Jerome Powell is stressing patience rather than pushing on with rate rises while European Central Bank arch-hawk Klaas Knot of the Netherlands advocates restraint. And more realism should in theory make investors less vulnerable to nasty shocks from important releases, such as surveys of purchasing managers that will be released on Thursday.

But the weight of bad numbers may test investors’ patience. The Citi Economic Surprise Index for the Group of 10 advanced economies earlier this month showed data undershooting expectations by the biggest margin since 2013. Also, the year-to-date number of mentions of “slowdown” in company transcripts is at its highest ever, on Morgan Stanley’s count. That has in the past suggested downside risks to consensus estimates.

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