As Big Tech Earnings Approach, S&P 500 Rises and Global Market Moves Intensify | Daily Market Analysis

Key events:

• Canada - BoC Gov Macklem Speaks
• USA - CB Consumer Confidence (Oct)
• USA - JOLTS Job Openings (Sep)
• Canada - BoC Senior Deputy Governor Rogers Speaks
• Canada - BoC Gov Macklem Speaks

The S&P 500 wrapped up Monday’s trading session with a gain, building on recent upward momentum as investors turn their focus to an eventful week ahead. Anticipation is high for significant economic data releases and quarterly earnings from leading tech giants.

The Dow Jones Industrial Average rose by 273 points, or 0.3%, while the S&P 500 index and NASDAQ Composite each added 0.3%.

This week, market participants are especially focused on earnings from Alphabet (NASDAQ: GOOGL) on Tuesday, followed by Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT) on Wednesday, and finally Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) on Thursday. Beyond their earnings, analysts and investors alike are watching for updates on how these tech leaders are adapting to the fast-evolving landscape of artificial intelligence (AI), as many have been ramping up capital expenditure to harness AI’s potential in their products and services. Strong or weak AI-driven growth signals from these firms could have lasting impacts on market sentiment for the rest of the year.

In currency markets, the USD/CHF pair remains under pressure, trading around 0.8650 during the Asian session on Tuesday after a weak performance in the previous session. A stronger US Dollar, supported by elevated Treasury yields, provides some support for the currency pair. The greenback has seen increased interest due to both its safe-haven appeal and investor caution leading up to the US election in November. Market sentiment has gradually shifted in favor of Former President Donald Trump. According to polling site FiveThirtyEight, Trump currently holds a 52% chance of winning, edging out Vice President Kamala Harris, who stands at 48%.

Meanwhile, the Swiss Franc faces its own challenges amid rising expectations that the Swiss National Bank will implement another rate cut at its December meeting. A softer economic outlook and easing inflation have raised the possibility of SNB intervention to support the economy, which could further weaken the Franc. Traders are watching Switzerland’s October Consumer Price Index (CPI) release scheduled for later in the week, which may provide a clearer picture of SNB’s next policy move. Additionally, demand for the Swiss Franc, often seen as a safe-haven currency, could decline as tensions in the Middle East appear to have cooled somewhat. While geopolitical risks remain, military operations have decreased, potentially reducing the need for safe-haven assets like the Franc. Nonetheless, uncertainty lingers, as Iranian Foreign Ministry spokesperson Esmaeil Baghaei recently indicated that Iran may still consider "all available tools" in response to recent Israeli military actions, keeping geopolitical volatility on the radar.

In Asia, the Australian Dollar has extended its decline against the US Dollar for the third consecutive session on Tuesday, as traders await the release of Australia’s Q3 CPI on Wednesday. This CPI data is expected to offer fresh insights into the Reserve Bank of Australia’s approach to monetary policy.

Currently, the RBA has adopted a hawkish stance, maintaining a cash rate of 4.35% - a level the central bank considers restrictive enough to bring inflation back within its target range of 2%-3% without negatively impacting employment. Given the RBA’s policy position, a rate cut appears unlikely in the immediate future. The AUD’s downward trend could be tempered if the CPI report suggests that inflationary pressures remain strong, which would support the RBA’s current policy stance.

Gold prices held firm through Tuesday’s Asian session, trading just above the $2,750 level and within close reach of the record high touched last week. Ongoing demand for safe-haven assets, fueled by both Middle East tensions and uncertainties surrounding the US election, has continued to support gold prices. Additionally, a softer tone in US Treasury bond yields and the general cautious mood in the market lend additional support to the precious metal.

However, positive risk sentiment could limit the upside for XAU/USD, as traders are expected to keep an eye on key US economic data due this week, which may shed light on the Federal Reserve’s next steps regarding interest rates.

In Japan, the Japanese Yen saw a slight recovery against the US Dollar during Tuesday’s Asian session, pulling away from a nearly three-month low reached on Monday. A significant factor contributing to the Yen’s resilience is a surprise drop in Japan’s unemployment rate for September, signaling tighter labor market conditions. This could lead to increased consumer spending and inflation, which in turn might prompt the Bank of Japan to reconsider its ultra-loose monetary stance. Japan’s Finance Minister also recently hinted at potential government intervention to support the Yen, further stabilizing the currency. The recent surge in US Treasury yields, however, may continue to limit any substantial appreciation of the JPY, particularly as market participants expect the Fed to proceed with its policy easing at a slower pace due to concerns about deficit spending after the US election.

Meanwhile, political developments in Japan may also play a role in the JPY’s outlook. Yuichiro Tamaki, leader of Japan’s Democratic Party for the People (DPP), recently voiced opposition to additional rate hikes by the BoJ. This political pushback may serve as an obstacle to more aggressive tightening policies. In addition, the global positive risk tone is likely to weigh on the JPY’s safe-haven appeal. Traders may remain cautious about taking strong positions ahead of the BoJ meeting and upcoming US economic data, which could heavily influence market expectations for US and Japanese policy directions.

Market participants are now awaiting the release of preliminary Q3 US Gross Domestic Product (GDP) figures and October’s nonfarm payrolls report, both of which are expected to offer critical insights into the Federal Reserve’s approach to rate cuts. These data points will be pivotal for determining whether the Fed maintains its current course or shifts toward more aggressive policy easing.