Apple earnings, US midterms and the Bank of England set to test fragile risk appetite
By Daniela Hathorn, senior market analyst at Capital.com
Global markets are opening November on a cautious note as they attempt to recover from a difficult October dominated by technology weakness and concerns over AI investment. Wall Street suffered another sharp selloff on Friday as investors questioned whether the vast sums being poured into AI infrastructure can generate sufficient returns. However, US futures are pointing to a rebound this morning, with Nasdaq futures up around 0.9% and S&P 500 futures gaining 0.5%. Asian markets are also recovering, led by South Korea, while European futures suggest a subdued but stable open. The bounce suggests investors remain willing to buy into weakness, although confidence in the technology sector remains fragile.
Oil eases on diplomatic hopes:
The standout development this morning is the sharp decline in oil prices, with Brent falling around 3% towards $110 as renewed diplomatic efforts involving Iran and Qatar raise hopes of easing tensions in the Middle East. Lower energy prices are offering some relief to inflation expectations and broader market sentiment, particularly after crude’s substantial rally in October. However, ongoing disruptions to shipping and energy infrastructure mean supply risks have not disappeared.
Meanwhile, gold is recovering modestly towards $3,900 after a difficult October, while Treasury yields remain elevated despite some easing from recent highs. Together, these moves suggest investors are reassessing inflation risks but remain cautious about the outlook for monetary policy.
Apple puts AI returns back in the spotlight:
Technology earnings will remain a major driver of sentiment, with Apple reporting today, followed by AMD and other major companies later in the week. Following the mixed reactions to Microsoft, Alphabet and Amazon, investors are becoming increasingly selective about their AI exposure. The focus has shifted from the scale of investment towards profitability, cash generation and whether demand can justify continued spending. Apple’s results will be particularly telling given its relatively limited exposure to large-scale AI infrastructure spending compared with its peers. Strong results could help stabilise the Nasdaq, but disappointing guidance could quickly undermine this morning’s tentative recovery.
Midterms, the Bank of England and jobs data take centre stage:
Looking ahead, Tuesday’s US midterm elections will be the week’s biggest political event, with investors watching how the balance of power in Congress could shape fiscal policy, government borrowing and Treasury yields. The Bank of England’s decision on Thursday is another key catalyst, with markets expecting a 25-basis-point hike despite signs of weakening UK growth. Meanwhile, today’s US ISM manufacturing survey and Friday’s employment report will offer further clues about the Federal Reserve’s next move, with markets currently pricing around a 74% probability of another hike in December.
Ultimately, the key question is whether improving risk appetite can withstand the combination of political uncertainty, restrictive monetary policy and increasingly demanding earnings expectations.
