By Amanda Cooper
LONDON, Oct 28 (Reuters) – Global stocks rose on Wednesday, boosted by renewed enthusiasm over AI ahead of earnings from industry bellwethers later on, while in Europe, financial shares weighed on the broader market on a big day for results and oil rallied.
The coming 48 hours are packed with potentially market-moving events, including rate decisions from major central banks including the Federal Reserve, European Central Bank and Bank of Japan, as well as results from some of the beacons of the AI trade, such as Microsoft and Alphabet.
New Zealand’s central bank delivered the first major surprise of the next couple of days by leaving interest rates on hold, contrary to expectations for a hike, triggering the biggest daily drop in the currency in five months .
Back on the equity market, Europe’s STOXX was down 0.2%, pulled lower by a decline in shares of Banco Santander, UBS and a 12% slide in the stock of payments company Adyen.
MSCI’s All-World index, meanwhile, was up 0.2%, as US stock futures edged up between 0.1% and 0.4% and stocks in Asia rallied, led by a 6% surge in South Korea’s Kospi after blockbuster earnings from chipmaker SK Hynix.
The AI rally faces its next test when technology giants Alphabet and Microsoft report earnings after the market close on Wednesday. Investors will be scouring for evidence of returns that would justify the hefty cost of the AI build-out.
“Investors want to see how these two mega-cap tech stocks are monetising their AI investments,” XTB director Kathleen Brooks said.
“These results could determine if the tech/AI rally has legs. Any signs of 1, a failure to monetise investments, or 2, a slowdown in capex spend, could have big repercussions for the AI trade on Wednesday night and Thursday,” she said.
A series of AI-related funding announcements from Meta, SpaceX and Broadcom this week has breathed new life into the AI trade, with Anthropic’s filing for an initial public offering also providing support.
“Not all big tech stocks should be treated equally regarding future potential growth. The period of a rising market lifting all stocks has started to shift,” said Chris Brigati, SWBC’s chief investment officer.
CENTRAL BANK SURPRISES
Beyond earnings, investors are awaiting the Bank of Canada and the Fed’s respective policy decisions later on Wednesday.
Expectations are for the BoC to raise rates and the Fed to keep them unchanged, though analysts at JPMorgan said in a note they anticipate at least two dissents from US policymakers, which could send a hawkish signal to markets.
Earlier on Wednesday, the Reserve Bank of New Zealand surprised investors by keeping interest rates at 2.75% in a narrow vote, sending the kiwi down more than 1.2% to a session low of $0.5583.
“Today’s decision shows the RBNZ is willing to surprise markets, a reminder that central banks do not take orders from markets,” Carol Kong, a currency strategist at Commonwealth Bank of Australia, said.
In the UK, finance minister John Healey will deliver a cautious first budget on Wednesday, one that prioritises stability in the bond market over the kind of big spending moves that Andy Burnham talked about when he became prime minister.
The pound was down a touch at $1.3293, while UK government bond yields edged up 2 basis points to 5.363%, as prices dipped. Gilt yields are heading for their first monthly decline since June this month, down 7 bps.
Israel’s shekel fell 1% after exit polls showed the country’s wartime election appeared deadlocked.
Elsewhere, oil prices rose after an attack on a refinery in Saudi Arabia, the world’s biggest crude exporter, renewed concerns around the risks to supply in the Middle East. [O/R]
Brent crude futures were up 1.2% at $115.24 a barrel, while European natural gas futures rose to fresh four-year highs, up another 1.1% at €97.08 per MWh.
(Additional reporting by Rae Wee in Singapore; Editing by Christopher Cushing, Kate Mayberry, Toby Chopra)
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