A look at the day ahead in European and global markets from Ankur Banerjee
A whirlwind October is set to end with investors unsure of the global monetary policy path in the near term, while a trade truce between the world’s top two economies calmed market nerves even as a mixed bag of mega-cap earnings kept momentum in check.
The action-packed week started with signs of cooling tensions between the U.S. and China. It also had the Federal Reserve delivering an expected rate cut, but with a warning from Chair Jerome Powell that this cut might be the last one in 2025.
That helped firm up the dollar, which is on pace for a nearly 2% gain for the month. The yen, on the other hand, was loitering around its lowest level since February at just under 154 per dollar, spurring some verbal jawboning by Tokyo officials.
The Bank of Japan held rates steady on Thursday as expected, but markets interpreted comments from Governor Kazuo Ueda as dovish even though he dropped hints that a rate hike remains on the table.
The slump in the yen, down nearly 4% in October, has been a boost for the Nikkei, which breezed past another record high and is on pace for a 16% surge in the month, its strongest monthly performance since January 1994. The “Takaichi trade” in all its glory.
South Korea’s Kospi, the best-performing stock market in the world this year, is on course for a 20% rise in October, the biggest surge since January 2001.
Much of the enthusiasm in the stock market this year has been about artificial intelligence. The earnings season has sketched out a mixed picture so far, with investors desperately seeking a clearer sense of how the massive – and still growing – capex binge around AI will boost future earnings.
Amazon shares soared as cloud revenue rose at its fastest pace in nearly three years, lifting Nasdaq futures and setting up a strong Halloween for tech stocks. The online retailer benefited as businesses continue to spend relentlessly on AI software development.
Watch out for a boost from Apple as well after the iPhone maker gave forecasts for holiday quarter revenue that surpassed Wall Street expectations.
Key developments that could influence markets on Friday:
Economic events: October inflation data for euro zone and France, September retail sales for Germany
(By Ankur Banerjee; Editing by Jamie Freed)
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