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Central banks, Trump-Xi meeting and Big Tech earnings set market tone

Markets are set for a pivotal week as investors await interest rate decisions from the Federal Reserve (Fed), European Central Bank (ECB) and Bank of Japan (BOJ) as well as a highly anticipated US-China trade summit and earnings from key US tech giants. Global equities surged at the start of the week, with Asian indices hitting new records and Wall Street closing at fresh highs on Friday, lifted by optimism over potential rate cuts and easing US-China tensions. Gold prices dropped to around USD 4080 per ounce on Monday, extending last week's losses after easing US-China trade tensions reduced demand for the metal's safe-haven qualities, while Bitcoin climbed 3.5% to around USD 115,500.

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  • Autore Shane Strowmatt, Senior Investment Writer
  • Tempo di lettura 5 minuto

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This week, markets are focused on monetary policy as the Fed, ECB, and BOJ all announce interest rate decisions on Wednesday and Thursday. Investors will also be looking for clues about what a trade agreement between the world's two largest economies could eventually look like when US President Donald Trump meets Chinese President Xi Jinping on Thursday, marking their first in-person meeting since Trump returned to office in January. In the United States, the ongoing government shutdown continues to disrupt official data releases; under normal circumstances, investors would watch for third-quarter gross domestic product data on Thursday and Personal Consumption Expenditures Price Index figures on Friday. Corporate earnings will help to fill in the gap with quarterly figures from "Magnificent 7" stocks: Google parent Alphabet, Meta Platforms, and Microsoft report on Wednesday, followed by Amazon and Apple on Thursday. In Europe, the spotlight is on inflation, with the euro area releasing Consumer Price Indices (CPI) for October on Friday, while Germany and France report third-quarter gross domestic product on Thursday alongside euro-area figures. On Friday, Asian investors will analyse China’s October Purchasing Managers' Index (PMI) as well as Tokyo’s CPI.

Asia shares advance on Fed and trade hopes

Asian stocks rallied on Monday, driven by growing expectations of a Federal Reserve interest rate cut this week and progress in US-China trade discussions. Major indices in Japan and South Korea led gains, with Japan’s Nikkei surpassing 50,000 points for the first time and South Korea’s KOSPI also reaching record highs, buoyed by strong performances from technology firms such as Samsung Electronics and SK Hynix. Japan’s Nikkei 225 was trading 2.5% higher, Korea’s Kospi gained 2.6%, and Australia’s S&P/ASX 200 was up 0.4%. Hong Kong’s Hang Seng Index advanced 1.1%, and mainland China’s CSI 300 also rose 1.1%, after China's industrial profits jumped 21.6% year-on-year in September, the largest increase since November 2023. The broader risk-on mood followed news that US and Chinese negotiators had agreed on a preliminary trade framework, helping to pause new tariff threats and defuse rare earth export restrictions.

US indices reach fresh highs

US stock markets achieved new records on Friday, with the Dow Jones Industrial Average closing 1% higher at 47,207.12 points and the S&P 500 rising 0.8% to 6791.69 points, both posting weekly gains of 2.2%. Moderating US inflation figures in September supported sentiment, fuelling expectations of a Fed rate cut on Wednesday. US consumer price inflation increased by 0.3% in September, placing the annual rate at 3%, both under market expectations and just above August's 2.9%, according to data released on Friday with a delay due to the US government shutdown. The core consumer price index, which excludes food and energy, also advanced 0.2% on the month and 3% year-on-year, matching August's annual pace.

US business activity accelerates

US business activity gained momentum in October, with the S&P Global Composite PMI Output Index rising to 54.8 from 53.9 in September, signalling solid expansion in both services and manufacturing sectors. Despite the stronger output, sentiment about the future deteriorated sharply, attributed to protectionist trade policies under the Trump administration, weaker export demand, and rising inventories. Meanwhile, the University of Michigan Consumer Sentiment Index recorded a preliminary reading of 53.6 in October, down from 55.1 in September and significantly below expectations of 55.0, according to data released on Friday. This decline suggests diminishing consumer confidence, which could pose challenges for the US dollar and reflects growing caution among households regarding current and future economic conditions. The drop in sentiment raises concerns about a potential weakening in consumer spending, a key driver of US economic growth.

Euro-area economy expands unexpectedly in October

The euro-area economy posted a surprise increase in activity in October, with the composite Purchasing Managers’ Index rising by one point to 52.2, defying forecasts for a small decline. The result was driven by the strongest order growth in two and a half years, particularly in the service sector, while manufacturing returned to the growth threshold. However, the overall improvement was held back by ongoing contraction in France, which offset a notably brighter outlook in Germany amid political uncertainty in Paris. Despite the expansion, business sentiment across the region dipped to a five-month low, with both industry and services less optimistic about the future. European stocks were steady on Friday, with the Euro Stoxx 50 up 0.1%, Germany’s DAX rising 0.1% and France’s CAC 40 essentially flat. Switzerland's SMI edged up by 0.1%.

UK retail sales beat expectations in September

UK retail sales increased by 0.5% in September compared to August, defying forecasts for a decline, and marking a fourth consecutive monthly gain. The Office for National Statistics attributed stronger sales in part to favourable weather supporting clothing purchases, and reported overall third-quarter retail sales up 0.9% on the prior quarter. The GfK consumer confidence index also improved in October, rising to -17 from -19 in September, suggesting greater optimism among British households.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Welltower. Annual general meeting at Pernod Ricard.

Economic data in focus: German ifo Business Climate Index (11:00), US durable goods orders (14:30) and Dallas Fed Manufacturing Index (16:30).

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