A look at the day ahead in European and global markets from Rae Wee
It’s a busy day for markets with a key policy decision from the Federal Reserve and a host of earnings in Europe and from Wall Street’s tech giants, with much riding on the latter in particular to drive the next leg of the market rally.
Results from Microsoft, Alphabet and Meta are due after the bell. The bar is high for them to deliver solid numbers that would justify stretched valuations.
Asia stocks were upbeat on Wednesday thanks to spillover from Wall Street on more optimism over artificial intelligence, with Nvidia announcing it would build seven supercomputers for the U.S. Department of Energy.
Microsoft meanwhile reached a deal allowing OpenAI to restructure into a public benefit corporation while giving the software giant a stake of 27% in the ChatGPT maker.
Things are looking rosy for now, but the key question remains: is the AI boom headed for a bubble or not?
Any signals that demand is tailing off or that the massive spending is not paying off as anticipated could spark a rush out of crowded positions in Big Tech stocks.
As for the Fed, a 25-basis-point rate cut on Wednesday is pretty much baked in, so investors will be looking for validation of further easing in December.
While an ongoing U.S. government shutdown has halted the flow of key economic data at a moment of uncertainty about the health of the U.S. job market, some signs of cooling labour conditions and milder-than-expected inflation should give policymakers confidence to lower rates.
Also in focus will be whether the central bank finally announces an end to its long-running balance sheet reduction programme, known as quantitative tightening (QT).
Elsewhere in markets, the yen strengthened after U.S. Treasury Secretary Scott Bessent urged Japan’s government to give its central bank scope to hike rates, escalating his warning to Tokyo against keeping the yen too weak through prolonged low borrowing costs.
The Australian dollar rose after data showed domestic consumer prices jumped by the most in 2-1/2 years in the September quarter, while a shockingly large jump in core inflation seemed to rule out a near-term interest rate cut.
And it’s golf clubs to golden crowns for U.S. President Donald Trump, who landed in South Korea on Wednesday for the final leg of his Asia trip.
He is set to discuss trade, investment and peace with South Korean President Lee Jae Myung in bilateral talks.
Lee will gift Trump a replica gold crown and award him with the “Grand Order of Mugunghwa”, the country’s highest decoration, the presidential office said.
Trump arrived in South Korea from Tokyo, where he lavished praise on Japan’s first female prime minister, Sanae Takaichi, welcoming her pledge to accelerate a military buildup and signing deals on trade and rare earths.
Takaichi had gifted Trump with a putter used by Shinzo Abe, his golfing buddy and Japan’s late leader – one of several references to Trump’s bond with Abe that underpinned ties between the countries during the U.S. president’s first term.
Key developments that could influence markets on Wednesday:
– Federal Reserve, Bank of Canada rate decisions
– Microsoft, Alphabet, Meta earnings
– Mercedes-Benz, UBS, Adidas, GSK, Airbus earnings
(By Rae Wee in Singapore; Editing by Sonali Paul)
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