Global Stocks Rise Ahead of Earnings; Oil and Treasury Yields Remain Elevated

Market Wrap-Up: Equities Advance as Investors Assess Yields, Oil, and Earnings

US and European equities advanced on Friday as investors positioned for major bank earnings and upcoming economic data, despite continued concerns over elevated oil prices and Treasury yields.

All three major US stock indices advanced, with the S&P 500 and Nasdaq Composite both gaining approximately 0.6%. European shares rose 1%, recovering their weekly losses, while the MSCI Asia-Pacific index excluding Japan gained 0.6%. Japan’s Nikkei closed little changed.

The third-quarter earnings season gets underway this week, with Goldman Sachs, JPMorgan Chase, and Wells Fargo among the US banks scheduled to report. Investors will assess corporate earnings against a backdrop of elevated borrowing costs and higher energy prices.

Doug Beath, global equity strategist at Wells Fargo Investment Institute, noted that narrow market participation in the S&P 500 suggests investors remain more confident in large technology companies than in other market sectors.

US Treasury yields moved higher on Friday as bond prices fell, reversing some of the gains recorded earlier in the week. The 10-year Treasury yield rose 2.8 basis points to 5.261%, following a 24-year high earlier in the week.

However, it declined 3.5 basis points over the week, marking its largest weekly fall in two months. Investors are looking to upcoming inflation reports for clues ahead of the Federal Reserve’s policy meeting on 27-28 October.

In Europe, government borrowing costs generally declined following a recent bond sell-off driven by inflation concerns and uncertainty surrounding France’s fiscal outlook. The premium on French 10-year government bonds over German Bunds stood at approximately 138 basis points, narrowing slightly over the week. Investors continue to assess France’s debt burden, budget deficit, and political outlook ahead of the 2027 presidential election.

Oil prices settled higher as Hurricane Isaias approached the northern Gulf of Mexico, prompting producers to shut in a substantial share of US offshore crude production. Brent crude futures rose 0.42% to $104.72 a barrel, while US West Texas Intermediate (WTI) gained 0.39% to $91.85.

Prices nevertheless faced competing pressures from reported progress in US-Iran discussions and plans by China to resume refined fuel exports following a brief holiday-related halt.

Spot gold rose 1.5% to $4,194.36 an ounce, recovering for a second consecutive session after falling to a two-month low earlier in the week. Bargain buying and a softer US dollar supported the rebound, while traders continued to assess the potential for further Federal Reserve rate increases. 

Investor attention will turn to upcoming US inflation data and major bank earnings this week, with both likely to shape rate expectations and sentiment towards US equities amid elevated Treasury yields and oil prices.

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DXY:

Key Takeaways:

- US inflation data and Fed commentary will shape expectations for the dollar’s next move.

- Treasury yields and the outlook for interest rates remain key drivers of dollar sentiment.

Technical Outlook:

- Daily Bias: Bearish

- Support: 101.92

- Resistance: 102.46

XAU/USD:

Key Takeaways:

- Fed rate expectations and Treasury yields remain central to gold’s near-term outlook.

- Middle East developments could influence safe-haven demand and price volatility.

Technical Outlook:

- Daily Bias: Bullish

- Support: 4,168

- Resistance: 4,217

WTI:

Key Takeaways:

- Hurricane-related production shutdowns and Middle East tensions remain key supply-side drivers.

- US-Iran discussions and changes in global fuel supply could influence oil-market volatility.

Technical Outlook:

- Daily Bias: Bearish

- Support: 87.97

- Resistance: 92.63

Dow Jones:

Key Takeaways:

- US inflation data and Fed commentary will influence interest-rate expectations and equity sentiment.

- Third-quarter earnings will provide insight into corporate resilience amid elevated borrowing costs.

Technical Outlook:

- Daily Bias: Bullish

- Support: 51,648

- Resistance: 52,000

Calendar Watch This Week

- CPI: Key indicator of US inflation, influencing Fed rate expectations and the dollar.

- PPI: Tracks producer-price pressures and potential changes in inflation.

- Initial Jobless Claims: Provides a timely signal of labour-market strength.

- ADP Employment Change Weekly: Offers an update on private-sector employment trends.

- NY Empire State Manufacturing Index: Gauges manufacturing activity and business sentiment in New York.

- Retail Sales: Measures consumer spending and provides insight into US economic activity.

- Philadelphia Fed Manufacturing Index (October): Tracks regional manufacturing conditions and new orders.

- Fed Officials’ Speeches: Markets will watch for signals on inflation and the future rate path.

- Middle East Developments: Any escalation or progress in negotiations could affect oil prices and risk sentiment.

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