Global markets entered a pivotal week with technology stocks leading gains ahead of crucial earnings reports, even as consumer confidence deteriorated and geopolitical tensions persisted across multiple fronts.

Tech Earnings Take Centre Stage

Nasdaq is up almost 4% and most other markets not too far behind as investors positioned ahead of this week's tech earnings bonanza. Microsoft, Google, and Meta report Wednesday, followed by Apple and Amazon Thursday, with markets seeking clarity on whether massive AI investments—running into the trillions across major players—will deliver promised productivity gains. The sector's confidence was underscored by fresh headlines of Google signing deals to reopen nuclear power plants, following Microsoft's earlier move to reactivate part of Three Mile Island, highlighting big tech's evolution into energy companies to power their AI ambitions.

Consumer Confidence Crumbles

Despite equity market resilience, U.S. consumer sentiment painted a troubling picture. The Conference Board's consumer confidence index fell to 94.6, a six-month low marking the third consecutive decline, while expectations dropped to 71.5, a three-year nadir. The ongoing government shutdown threatens to intensify pressure, with 42 million Americans set to lose food stamps this weekend unless Congress acts. Notably, confidence diverged sharply by income, improving for those earning over $200,000 while deteriorating for those under $75,000.

Oil Markets Stabilise After Sanctions Surge

Oil prices pulled back slightly, with WTI and Brent both down around 1.8% Tuesday, following last week's dramatic 5.5% surge triggered by Trump's sanctions on Russian oil giants Rosneft and Lukoil. The sanctions had prompted India and China to pause Russian oil purchases, though markets now appear to be digesting OPEC's ability to compensate for any supply disruptions.

Central Bank Decisions Approach

The week's market dynamics will crystallise around central bank decisions. The Bank of Canada is expected to cut rates Wednesday, while the Federal Reserve appears set for another 25 basis point reduction Thursday despite limited official economic data due to the shutdown. Markets have also priced in another 25 basis point cut at the Fed's December meeting

Closer to home Australia's CPI data, released Wednesday morning, could prove decisive for the RBA's November decision and will be worth watching out for.  The market expects 0.8%, which may cement expectations the RBA will hold rates, despite earlier speculation of a November cut following weak employment data.

Geopolitical Developments Continue

Trump's diplomatic efforts expanded with a rare earth minerals agreement signed with Japan's Prime Minister Sanae Takechi, essentially replicating last week's Australia deal but focusing on midstream processing capabilities. The scheduled October 30 meeting between Trump and Xi Jinping at APEC remains on track, offering potential trade stability. However, Middle East tensions resurfaced as the Gaza ceasefire appeared to crumble, with Netanyahu promising "powerful strikes" following attacks on Israeli soldiers.

Looking Ahead

Markets face a defining moment as tech earnings meet economic reality. While AI optimism drives equity valuations higher, deteriorating consumer confidence and the human cost of the government shutdown present sobering counterpoints. With major central banks poised to act amid incomplete data and persistent geopolitical uncertainties, we are particularly interested in Andrew Hunt’s observations about what is happening below the surface in the pipes of the global financial system. In this week’s video we discuss the extent to which the capital flows into the U.S., which counterintuitively, accelerated after Liberation Day have started to ebb. He believes this is the single most important factor to watch regarding the US economy and that the next week or so could be decisive.