Ongoing turbulence across the oil and bond markets is expected to remain a primary focus for investors entering the new trading week. Experts at Helaba note that the strained sentiment across financial markets is likely to persist until at least early November, coinciding with the timing of the US midterm elections. Analysts also suggest that a resolution to the US-Iran conflict could potentially emerge by that period. According to Daniela Hathorn, an analyst at broker Capital.com, the decisive question for markets is whether corporate profits will remain sufficiently high to absorb the burden of increased financing costs, with the technology sector drawing particular attention. Ulrich Kater from DekaBank points out that the widening gap between the DAX and technology-heavy US indices raises questions regarding the sustainability of the upward movement. Following fluctuations during the previous week, the German benchmark index traded around half a percent below its previous week's close on Friday afternoon. Analysts at LBBW observe that while equity markets have largely absorbed the steady rise in yields up to this point, the correlation between stock and bond prices has increased sharply, accumulating corrective potential in the markets.
Bond yields showed signs of stabilization over the course of the week but remained near multi-year highs. European fixed-income markets focused heavily on France, where the medium-term outlook for public finances remains challenging. Furthermore, persistent inflation and interest rate concerns among investors, driven by stubbornly high energy costs, pushed yields higher. Brent crude oil prices rose by roughly half a percent compared to the previous week's close, remaining above the 100-dollar threshold following sharp gains earlier in the week.
In Switzerland, several corporations are scheduled to present their quarterly results and business updates in the coming days. Givaudan and Sulzer are set to start on Tuesday, followed by Bossard and Lonza holding its Capital Markets Day. Thursday brings third-quarter updates from VAT, Cicor, DocMorris, and Kuros. The broader reporting season also kicks off in the United States, where major banks will release their quarterly figures. Investors are seeking clarity on how the recent sharp rise in bond yields impacts merger and acquisition activity, lending operations, and refinancing expenses. Four of the six largest US financial institutions—JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo—are reporting on Tuesday, with Morgan Stanley and Bank of America following on Wednesday. The KBW banking sector index has declined by 13 percent since its peak in August. Analysts indicate that investors are looking for assurances that capital market advisory pipelines remain stable, loan growth proceeds according to plan, and rising deposit costs are contained. Experts do not anticipate a recurrence of the unrealized losses in securities portfolios witnessed during the banking turmoil of 2023, as most institutions have since improved risk management practices. Investment banking remains under close observation after elevated bond yields prompted the cancellation of initial public offerings late in September, and overall corporate guidance from the sector remains mixed.
Macroeconomic data releases feature the US inflation report on Wednesday. Commerzbank economist Christoph Balz forecasts a significant rise in September US consumer prices, largely driven by higher gasoline costs. While the core inflation rate excluding energy and food is expected to be more moderate, this is unlikely to deter the central bank from implementing another interest rate increase in December. Additional data releases include final German September inflation figures on Tuesday, Chinese trade data on Wednesday, Eurozone industrial production for August on Thursday, and US producer prices alongside retail sales data. The week concludes with final Eurozone inflation readings as well as US trade balance and industrial production numbers for September.
