A Look Ahead at European and Global Markets

By Kevin Buckland

Yields have lowered as the week ends, easing the pressure on equities and allowing the weakened yen and euro to stabilize against the dollar.

However, this calm seems temporary as significant risk events approach next week, including mega-cap earnings from five of the "Magnificent 7", a crucial U.S. payrolls report on Friday, and the final stretch toward the U.S. presidential election on Nov. 5.

The “Trump trade” is gaining traction, following a rise in the odds of a Donald Trump second presidency on betting platforms, amidst close polling results.

Currently, the markets indicate a dollar poised for a fourth week of gains and Treasury yields advancing for the sixth consecutive week, influenced by Trump's pro-inflation policies such as increased tariffs and taxes.

Robust U.S. economic data has led to a decrease in expectations for Federal Reserve easing, supporting higher yields and a stronger dollar.

Stocks are experiencing a brief reprieve to end the week, driven mostly by optimism surrounding Tesla’s earnings, although the Dow saw a decline. Investors are now focusing on upcoming earnings from Alphabet, Amazon, Apple, Meta, and Microsoft over the next three days.

In Asia, markets are mixed. Japan’s Nikkei has dropped 1%, coinciding with a yen rebound and uncertainty surrounding an upcoming general election that may affect the ruling coalition.

The MSCI world equity index is heading towards a weekly loss of 1.2%, which would end its two-week uptrend.

Pan-European STOXX 50 futures are edging downward, while the cash STOXX 600 is set for a 1.1% decline this week.

In Europe, the upcoming economic calendar is relatively light, with Germany's Ifo surveys taking the spotlight on Friday, alongside earnings reports from Sanofi, Natwest, and Mercedes-Benz.

In Washington, the IMF-World Bank meetings are ongoing, with various policymakers voicing their perspectives. Japanese officials are using this platform to caution against speculative actions affecting the yen. Bank of England Governor Andrew Bailey will also speak on Saturday.

Key Developments Influencing Markets on Friday:

• German Ifo surveys (Oct)
• Earnings from Sanofi, Natwest, and Mercedes-Benz
• IMF-World Bank meetings in Washington DC

By Kevin Buckland; Editing by Edmund Klamann