Nick Spencer-Skeen, Senior Executive Officer, Lunaro Markets Limited
Friday Closing Prices (23 October 2026)
- S&P 500 7,623 (-0.52%)
- Nasdaq 28,957 (-0.01%)
- Gold $3,995 (-0.71%)
- Brent Crude Oil $116.83 (+3.57%)
A mix of political instability and growing anxiety over AI-related borrowing weighed on risk sentiment for global markets last week. Bond markets once again led the price action that traders noted.
France remained Europe’s principal flashpoint. Violent protests and mounting fiscal concerns pushed the spread between French and German debt (the 10-year OAT-Bund) 29bps wider to around 170bps, its second-largest weekly widening since 19901. The turmoil pressured French assets and the Euro, while disappointing eurozone PMI data added to the region’s difficulties2.
Across the Atlantic, US Treasury yields briefly retested 5% after October’s flash PMI revealed the sharpest increase in selling prices since 20221&2. However, a late-week rally left the 10-year yield 12bps lower at 4.99%1. Meanwhile, concerns over debt-funded AI investment and elevated energy prices pushed credit protection costs higher, reinforcing the broader risk-off mood.
In Asia, reports that the Bank of Japan (BoJ) intends to maintain its tightening trajectory weighed on Japanese equities3, while China announced modest additional stimulus following seven consecutive months of declining fiscal expenditure4.
Equities finished the week broadly lower, with the Nasdaq 100 falling 1.8%, S&P 500 declining 1.2%, and Nikkei losing 2.2%1. The dollar was little changed, while gold dropped 3.1% to $3,9951. Brent crude pushed higher, keeping energy-driven inflation concerns firmly in focus.
Great Expectations, Greater Expenditure
As we alluded to in the introduction, last week’s earnings season brought the sustainability of AI spending back into focus. Investors are increasingly questioning whether revenue growth can justify the scale of capital investment.
Meta reported revenue growth of 26% to $64.6 billion, supported by resilient advertising demand. However, quarterly capital expenditure reached $34.9 billion, while free cash flow turned negative, reinforcing concerns over AI investment intensity5.
Tesla reported revenue of $28.1 billion, with adjusted earnings exceeding expectations. Stronger vehicle deliveries provided support, although rising expenditure on autonomous driving and robotics continued to weigh on profitability6. Meanwhile, Netflix delivered better-than-expected earnings but disappointed investors with softer forward guidance7.
Attention now shifts to a particularly consequential week for megacap tech earnings8. Microsoft and Alphabet report Wednesday, followed by Amazon on Thursday, with cloud growth and capital expenditure guidance likely to dominate investor scrutiny. Beyond technology, Visa, Boeing, and UPS provide insights into consumer spending and economic activity, while Eli Lilly offers an update on pharmaceutical demand.
Finally, ExxonMobil and Chevron report Friday, with investors watching how elevated oil prices are translating into earnings and cash generation8. With AI financing concerns already unsettling credit markets, next week’s results will likely drivemay drive overall market sentiment.
A Busy Week For Central Banks
Central banks return to centre stage next week, with five major policy decisions scheduled between Wednesday and Friday9. The question for all the policymakers is increasingly how much further tightening economies can absorb, given the headaches being caused by the energy crisis and subsequent inflationary pressures.
Wednesday brings decisions from New Zealand (RBNZ), Canada (Bank of Canada), and the US (Federal Reserve). New Zealand is expected to raise rates, while the BoC faces a difficult balancing act between weakening employment and inflation pressures. The Fed is widely expected to hold, leaving Chair Warsh’s guidance on the timing of further tightening as the principal focus.
Thursday’s European Central Bank (ECB) decision comes amid renewed French political instability and deteriorating regional growth indicators. Policymakers are expected to hold, although inflation risks remain elevated.
Finally, Japan (BoJ) meets Friday, with markets watching for signals of a potential December hike. Across all five meetings, forward guidance may prove more consequential than the decisions themselves.
A Budget Under Pressure
The UK Budget on Wednesday will be closely watched, with Chancellor John Healey facing the difficult task of balancing fiscal discipline against elevated borrowing costs and persistent inflation10.
With fiscal headroom constrained by rising debt-servicing costs, markets will be scrutinising the government’s tax and spending plans for evidence that its fiscal rules remain credible. Speculation has centred on potential changes to capital gains, inheritance, and pension taxation, while additional support for households facing elevated energy costs remains a political priority.
The accompanying Office for Budget Responsibility (OBR) forecasts will be equally important, particularly revisions to growth, inflation, borrowing, and the government’s remaining fiscal headroom.
For investors, the reaction in gilts and sterling will providemay provide the clearest verdict. With UK borrowing costs already elevated, any indication of unfunded commitments risks reigniting pressure on long-dated yields.
Sources:
- Bloomberg Terminal Price Quote ( 10yr OAT-Bund Spread, SXXP, UKX Nikkei 225, EUR/USD, CO1, US10yr, Gilt 10yr, Bund 30yr, Japan 30yr)
- PMI Releases
- Bank of Japan may raise inflation forecast, stand pat on rates, sources say | Reuters
- China Barely Eased Austerity Just Before Shift to Stimulus Mode
- Tesla Releases Third Quarter 2026 Financial Results
- FINAL-Q3-26-Shareholder-Letter.pdf
- Earnings Reports | Nasdaq
- Central Bank Rates | Worldwide Interest Rates
- Autumn Budget 2026: Background briefing – House of Commons Library
