Big week for Big Oil, Big Tech and central banks | MarketTalk

00:00:00: Hi and welcome to Swisscote's Daily Market Talk.

00:00:03: It is Monday, October, and we are heading into a busy week of central bank decisions, growth data & heavyweight earnings as concerns about AI and technology trade collide with geopolitical tensions at high energy prices.

00:00:19: On the central banks front, the Fed, European Central Bank & Bank of Japan they're all expected.

00:00:27: widening European bond stress, edge pressure and attractive Japanese yields actually raise questions about the global capital flows.

00:00:34: And on the earnings front US big oil and big technology will likely announce shiny results.

00:00:40: but for the technologies especially investors we'll be questioning the cost of that impressive growth.

00:00:46: so what's to come this week and how markets could react to the news provided the broader macroeconomic and geopolitical context.

00:00:55: But before we do, as always please keep in mind that opinions are my own.

00:01:09: So last week was a difficult line, it was marked by escalating worries regarding the AI and technology trade.

00:01:15: The first batch of earnings put to technology earnings inability to ease concerns regarding massive AI build out in that despite very strong results showing that AI is actually paying off.

00:01:27: so we saw flight-to-safety safety being US Treasury's mostly massing capital while gold was left behind.

00:01:34: member the yellow metalist testing the four thousand dollar support to the downside right now with however, rising chance of bringing in buyers as US Treasury yields fall in tandem.

00:01:44: And all these events and happenings were topped by escalating Middle East tensions last week.

00:01:50: no progress in Russia, Ukraine more rising oil prices as a result of it with US crit spiking past the one hundred five dollar per barrel mark on Friday last week and unrest in France escalated again during this weekend though.

00:02:04: The early market moves this morning actually suggest that to the letter was already mostly priced in an.

00:02:10: its won't be a disaster in their markets And we will talk about it A bit later.

00:02:15: but still the U S ten year yield is pushing lower.

00:02:19: This morning, it was pushing lower in Asia with gold mining support near the four thousand dollar per ounce.

00:02:25: psychological marketing that investors kick off their new week.

00:02:28: With visible interest for safe haven assets.

00:02:31: but interestingly major US and European indices point at a slightly positive start with oil prices slightly lowered this morning and technology heavy indexes are actually following.

00:02:44: Now it will be a very, very busy week both on the climate calendar central bank and earnings front.

00:02:50: We have interest rate decisions from the Fed Bank of Japan and European Central Bank this week.

00:02:55: we have third quarter growth figures from US and Europe area And another heavy round off earnings including Microsoft Alphabet Amazon SK Hynex but also big oil like Exxon Mobil and Chiron along with banks in Europe.

00:03:09: This means that this week will present plenty opportunities to either restart confidence or give investors another reason to question how much they are willing to pay for the AI dream, energy and banks.

00:03:22: So let's start with central banks if you will!

00:03:25: All three of them – FED, ECB & BRJ- are expected to maintain their interest rates unchanged this week so the focus must be on what policy makers signal for December rather than what they'll do next week.

00:03:37: Even If Interest Rates Remain Unchanged The combination risk and increasingly nervous financial markets leaves plenty to discuss for officials on both sides of the Atlantic Ocean.

00:03:50: For the Fed, The question is how balance a resilient U.S economy and inflation pressures against signs of recent weakness in the labor market?

00:03:58: Many economists including one my favorite Muhammad Ali Ryan warned that hiking interest rates when price pressure actually come from walled energy price spikes won't have balanced economy.

00:04:13: They would, on the contrary increase pressure on areas that are already under a heavy pressure like homes and consumer loans for example And for the European Central Bank while the challenges particularly uncomfortable.

00:04:28: High energy prices threaten to keep inflation elevated whilst squeezing an already fragile economy and rising political unrest risk spreading to other euro area countries.

00:04:38: Bond deals are pushing higher across the block, while spreads over German bonds are widening meaning that financial conditions already tightening without the European Central Bank having to raise interest rates further.

00:04:50: On the contrary, it will be very interesting to see and hear whether ECB officials signal a willingness.

00:05:08: problems like it is the case in France today and rather, The European officials will finally come up with another program.

00:05:15: With an other reassuring acronym perhaps Bond buying.

00:05:19: others neglected debt to make intervention look different this time!

00:05:23: This week we'll also be busy with European bank earnings as I said earlier where fixed income debts will particularly be in focus for investors.

00:05:31: Now moving into Japan Investors will watch how firmly the Bank of Japan signals further monetary policy normalization And what that means for the Japanese yen, the Japanese yields and a pill of bringing money back home For the Japanese institutional investors.

00:05:46: Lately The appetizing Japanese yields convinced Japanese investors not to seek revenue abroad.

00:05:51: Indeed US fiscal worries and now the European debt turmoil are convincing enough To keep the Japanese funds at home Also helping the Japanese Yen gain some more field against U.S.

00:06:03: dollar on Europe.

00:06:05: So this is all for central banks, then comes growth in an environment of rising interest rates.

00:06:12: matters for forecasting the currency moves.

00:06:14: And in this context, The US growth story has been robust thanks to AI build out but also thanks to U.S energy independence and its ample government spending while the euro area growth numbers were much lower But surprisingly resilient still In face of rising European central bank rates higher energy prices transport disruptions due low river levels in Europe through hot and dry summer months and troubles across the european core industry, especially due to the Chinese competition adding pressure on employment and investment in the euro area.

00:06:49: And that's only partly compensated by AI buildout and productivity gains there.

00:06:54: so the question is whether this positive momentum we saw could stay in place with all of these and how the latest unrest in France potentially spreading into other euro-area countries will impact growth?

00:07:07: Now, looking at the currency front.

00:07:10: The EURUSD is under pressure after stepping into the medium-term bearish consolidation zone back in the beginning of October and the pair will remain under pressure below the one thirteen fifty level which is a major thirty eight point two percent Fibonacci retracement on twenty five to twenty six rally.

00:07:32: Now coming back to the resilience of US growth, there is one question increasing the troubling markets and investors.

00:07:38: And that's how sustainable is AI spending boom on their printing part of that strength?

00:07:43: What are the costs for strong growth?

00:07:45: So yes this brings me to corporate earnings as last week some heavy waste energy technology in the U.S will go to the earnings confessional which includes names like ExxonMobil Chevron Microsoft Alphabet Amazon with their cloud businesses but also SK HiNX Korea.

00:08:02: Expectations are high, obviously.

00:08:04: And the chances is that companies will beat expectations!

00:08:07: But especially for technology?

00:08:09: That's not an issue anymore.

00:08:11: Investors no longer impressed by big growth numbers They're rather worried about cost and increase leverage for passing these high-growth numbers.

00:08:20: Remember MetaLouse Week was heavily punished for spending too much money on AI even though they show this AI spending is boosting their revenue right now.

00:08:29: Therefore, and judging by the market's reaction to early technology results strong beast won't guarantee stock rallies.

00:08:36: Investment plans will matter.

00:08:38: they'll matter more.

00:08:39: investors want to hear less spending or at least not more in actual environment and cheer companies that return to reason in this spending context.

00:08:50: look Microsoft, for example having decided to contain their spending already in the latest quarter has performed better than other major peers like Google and Amazon.

00:08:59: For example unless comparably to Meta as they don't rent out complete capacity but Microsoft has done better over the past few months.

00:09:07: so let's see if this trend will continue to shape the AI investment theme the latest results.

00:09:15: But this is all for this Monday, I'm Yipega Skardishke and thank you for joining me And Thank You For All Your Beautiful And Separative Commands!

00:09:22: I hope This Episode Of Market Talk Has Been Helpful And It Has Been Insightful To You.

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00:09:53: So I will meet again tomorrow… And until then, good day trading!

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