Global markets had a pivotal week as tech stocks rallied ahead of major earnings from companies like Microsoft, Google, Meta, Apple, and Amazon, with investors watching whether AI investments will deliver real gains. Meanwhile, U.S. consumer confidence fell, oil prices eased after recent spikes, and central banks prepared for key rate decisions. In Australia, upcoming CPI data may influence the RBA’s next move, while ongoing geopolitical tensions continue to shape market sentiment.
Global markets entered a pivotal week with technology stocks leading gains ahead of crucial earnings reports, even as consumer confidence deteriorated and geopolitical tensions persisted across multiple fronts.
Tech Earnings Take Centre Stage
Nasdaq is up almost 4% and most other markets not too far behind as investors positioned ahead of this week's tech earnings bonanza. Microsoft, Google, and Meta report Wednesday, followed by Apple and Amazon Thursday, with markets seeking clarity on whether massive AI investments—running into the trillions across major players—will deliver promised productivity gains. The sector's confidence was underscored by fresh headlines of Google signing deals to reopen nuclear power plants, following Microsoft's earlier move to reactivate part of Three Mile Island, highlighting big tech's evolution into energy companies to power their AI ambitions.
Consumer Confidence Crumbles
Despite equity market resilience, U.S. consumer sentiment painted a troubling picture. The Conference Board's consumer confidence index fell to 94.6, a six-month low marking the third consecutive decline, while expectations dropped to 71.5, a three-year nadir. The ongoing government shutdown threatens to intensify pressure, with 42 million Americans set to lose food stamps this weekend unless Congress acts. Notably, confidence diverged sharply by income, improving for those earning over $200,000 while deteriorating for those under $75,000.
Oil Markets Stabilise After Sanctions Surge
Oil prices pulled back slightly, with WTI and Brent both down around 1.8% Tuesday, following last week's dramatic 5.5% surge triggered by Trump's sanctions on Russian oil giants Rosneft and Lukoil. The sanctions had prompted India and China to pause Russian oil purchases, though markets now appear to be digesting OPEC's ability to compensate for any supply disruptions.
Central Bank Decisions Approach
The week's market dynamics will crystallise around central bank decisions. The Bank of Canada is expected to cut rates Wednesday, while the Federal Reserve appears set for another 25-basis point reduction Thursday despite limited official economic data due to the shutdown. Markets have also priced in another 25-basis point cut at the Fed's December meeting
Closer to home Australia's CPI data, released Wednesday morning, could prove decisive for the RBA's November decision and will be worth watching out for. The market expects 0.8%, which may cement expectations the RBA will hold rates, despite earlier speculation of a November cut following weak employment data.
Geopolitical Developments Continue
Trump's diplomatic efforts expanded with a rare earth minerals agreement signed with Japan's Prime Minister Sanae Takechi, essentially replicating last week's Australia deal but focusing on midstream processing capabilities. The scheduled October 30 meeting between Trump and Xi Jinping at APEC remains on track, offering potential trade stability. However, Middle East tensions resurfaced as the Gaza ceasefire appeared to crumble, with Netanyahu promising "powerful strikes" following attacks on Israeli soldiers.
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Markets ended February navigating a complex mix of fading tariff uncertainty, continued technology sector volatility, a mixed Australian earnings season, and a sharp escalation in Middle East tensions that has pushed energy prices and geopolitical risk back into focus. While resilience remains, investors are now balancing sticky inflation, potential rate hikes, and rising global instability as key drivers for the weeks ahead.
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