By Daniela Sabin Hathorn, senior market analyst at Capital.com
Markets have started the week cautiously constructive with Asia leading higher on the back of a positive session in Japan on pro-stimulus expectations, while China’s Q3 GDP beat on the quarter helped the tone. U.S. equity futures are cautious heading into a heavy earnings slate, with focus this week on big-cap earnings (Tesla, Netflix, Procter & Gamble early in the week) where guidance on AI capex and margins will steer index leadership.
S&P 500 daily chart
Past performance is not a reliable indicator of future results.
On the rates side, markets lean toward additional Fed cuts at the Oct 28–29 meeting, so any deviations could see moves in front end yields which could show up quickly in equities and the dollar. Meanwhile, gold is consolidating near record territory after last week’s surge with the potential for some sideways trade this week as the topside remains choppy.
A key focus this week is going to be the delayed US CPI reading scheduled for Friday. Consensus is expecting a rise to 3.1% from 2.9%. Considering it is highly unlikely to see the yearly figure rise further beyond that, it could become a risk-on event for markets. A reading at or below 3.1% would be seen as constructive as markets are already expecting the Federal Reserve to tolerate a period of above-target inflation whilst still lowering rates to a more neutral level, so this would simply confirm what the central bank has already forecasted. Anything above 3.1% – although highly unlikely – could threaten the outlook for rates heading into the news year, likely dampening sentiment in equities and gold as a repricing of expectations takes place.
