​​​​​​​Global Markets Nervous Amid Rising Tensions in Gaza, Bank Results, and Economic Data | Daily Market Analysis

Key events:

• Eurozone - ECB's Enria Speaks
• Eurozone - ECB Supervisory Board Member Tuominen Speaks
• UK - BoE Deputy Governor Woods Speaks
• UK - BoE MPC Member Pill
• USA - FOMC Member Harker Speaks
• USA - FOMC Member Harker Speaks

Markets are on edge as Israel makes preparations to deploy troops into Gaza, raising concerns that the conflict with Hamas might spill over into neighboring regions. Iran, in particular, has issued warnings of a potential regional escalation if attacks on Palestinians persist.

In Asia, sentiment is fragile, with Japan's Nikkei down by as much as 2%, and other equity indices also trading in the red. This hints at the possibility of further declines in European markets following a 1% selloff in the pan-European STOXX 600 on Friday.

The S&P 500 experienced a decline on Friday and posted a modest 0.4% gain for the week. Similarly, the Nasdaq saw a 0.2% decrease last week as investors gravitated towards safety in the face of growing uncertainties.

The People's Bank of China is expected to make a decision on its key loan prime rates this week. However, a change appears unlikely, given that the PBOC recently maintained medium-term lending rates at their existing levels.

The Japanese yen has slightly strengthened and remains just shy of the 150 level. Investors believe that if it breaches this threshold, the Japanese government may intervene in currency markets. This week's focus will be on Japanese industrial production and, more significantly, consumer inflation data for September. Any sign of persistent inflation could provide the Bank of Japan with further motivation to tighten monetary policy, which might support the yen.

On the whole, currencies have retraced some of their movements from the end of the previous week. The US dollar index has eased slightly to 106.51 from its peak of 106.79 on Friday.

The euro has gained 0.14% to $1.05255, while the yen has shown little change at 149.445 per dollar.

Israel's shekel initially weakened to 3.9900 per dollar, marking the first time since April 2015, although it has since rebounded by approximately 0.3% to 3.9650.

The initial batch of bank results released last Friday appeared positive, with a notable increase in Q3 profits, around 34%, attributed to higher net interest income thanks to the Federal Reserve's more substantial interest rates. Bank shares experienced an uptick in response to these results. However, the optimism was short-lived, as concerns loomed over the economic outlook for the upcoming quarters. Uncertainties persisted regarding clients' ability to repay loans in an environment of rising interest rates and a slowing economic growth trajectory. Moreover, the rising interest expenses were cause for alarm, surging by 275% at Wells Fargo, 185% at Citi, and 170% at JP Morgan. The CEO of JP Morgan expressed that "this is the world's most dangerous time in decades."

The third quarter earnings season is gaining momentum, with several major US companies scheduled to release their results. This season is expected to show improved profit growth after a relatively lackluster first half.

Tesla (NASDAQ: TSLA) will initiate the earnings reports for megacap companies after the market closes on Wednesday. These firms have played a central role in driving the equity market rally this year.

Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS) are both set to announce their results ahead of the market opening on Tuesday, with several regional banks also reporting in the coming week.

Beyond earnings, US retail sales figures for September, to be released on Tuesday, will provide insights into the strength of consumer spending, a key driver of the economy, accounting for around two-thirds of economic activity.

Market observers will be closely monitoring comments by Fed Chair Jerome Powell on Thursday when he addresses the Economic Club of New York.

Additionally, on Wednesday, market watchers will be analyzing a flurry of economic data from China to assess whether the uneven recovery in the world's second-largest economy is stabilizing. Questions persist regarding the impact of the property sector crisis and the extent of additional stimulus Beijing may need to implement.

Economists are anticipating GDP data to indicate a modest year-over-year pickup of 4.4%, still below Beijing's annual growth target of approximately 5%. Reports on industrial production, retail sales, and unemployment are also expected to show slight improvements.

In the UK, the latest employment report will be released on Tuesday, followed by inflation figures for September a day later. These reports mark the final data releases ahead of the Bank of England's November meeting.

Gold saw a significant surge of over 3% on Friday, as investors sought refuge in the precious metal amid expectations that Israel might initiate an offensive in Gaza at any moment. Gold purchases slowed on Monday, as the weekend did not bring the worst-case scenario to fruition. However, there is still no apparent viable solution or quick fix to alleviate tensions in Gaza. A potential Israeli offensive could potentially propel gold to $2,000 and beyond.