Global stocks rose while oil prices fell on October 27 as investors reacted to ongoing diplomatic efforts to resolve the Middle East conflict and anticipated earnings reports from major US technology companies. Iran’s Supreme Leader met with the country’s security chief to discuss strategies for advancing Iran's interests and conditions for ending the ongoing war, according to state media. Diplomatic talks involving representatives from Saudi Arabia, Turkey, and Pakistan also took place in Tehran.
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Brent crude prices dropped 1% to $114.74 per barrel, reversing earlier gains. Meanwhile, Europe’s STOXX 600 index increased by 0.1%, with S&P 500 and Nasdaq futures rising 0.2% and 0.3% respectively. In Europe, banking stocks drew attention as HSBC, the continent’s largest lender, fell by 6.7% after failing to meet revenue expectations for the July-September quarter due to slower growth in its wealth management sector, despite reporting pretax profits that aligned with forecasts.
Ipek Ozkardeskaya, a senior market analyst at Swissquote Bank, noted that banks had previously benefitted from high volatility, which had led to record results, but are now under pressure due to rising short-term yields exceeding long-term yields, affecting income revenue. She remarked that banks are in a relatively better position compared to sectors more vulnerable to increasing costs.
As quarterly earnings reports take center stage, investors are assessing the implications of the conflict in Iran, including escalating costs and interest rates, on corporate performance. This week, over a third of S&P 500 companies are expected to release earnings. Early reports showed mixed results, with Coca-Cola and United Parcel Service upgrading forecasts, while Hilton and JetBlue faced rising costs due to the Middle East situation.
Later in the week, the focus will shift to major AI companies such as Microsoft, Amazon, and Alphabet, with investors looking for indications that their substantial investments are producing expected returns. Microsoft shares dipped 0.8% in premarket trading, while Amazon and Alphabet experienced slight gains. Jefferies economist Mohit Kumar expressed a medium-term optimistic outlook on investments in supporting sectors, anticipating continued strength in capital expenditures and robust earnings.