Wall Street Earnings, UK Budget, and US Election Momentum

Major Wall Street Earnings on the Horizon

Huge week on Wall St – a third of the S&P 500 and 5 of the Mag 7 reporting...last week before the election on November 5th and last before the Fed decision on Nov 7th. Risk is bid though with the Vix showing little real movement, and the Nasdaq Composite hitting a new record high.

UK Budget Countdown

One day to the Budget – UK 10yr yields higher at 4.284%, but that’s largely off the back of the US 10yr breaking 4.3%. The worry for the chancellor is going to be one of optics - that though the Fed and other CBs are cutting rates, markets are moving in the opposite direction right now, which will mean that, combined with the extra borrowing, it will be an open goal to sell gilts.

US Election Momentum Boosts Bitcoin and DJT

Election countdown: scores on the doors—Bitcoin rallied 2% to above $71k, its best since early June; DJT was up another 22% almost to $47, up almost 300% since it bottomed in September as markets felt the initial Harris momentum start to fade and the betting markets flipped.

Looking also for signs of a small cap rotation (Russell 2k +11% YTD, vs +22% for the S&P 500) and yesterday, we saw the small caps +1.63% vs +0.27% for the broader market. USD has just come off a touch after hitting a three-month high along with Treasury yields.

And here is why the market is quite so convinced Trump will take the election (RealClearPolitics)

European Stocks Climb Amid Earnings Reports

European stock markets are also in the green on a bumper earnings day. BP shares declined 1% as profits slid, while HSBC rallied over 3% to its best since 2018 as profits beat expectations. London, Paris, and Frankfurt all traded up by around a third of one percent in early trading on Tuesday.

Alphabet Earnings Expectations and AI Developments

Alphabet reports today - analysts expect a profit of $1.83 per share, up 18.1% from $1.55 per share reported in the year-ago quarter. In fiscal 2024, EPS is seen at $7.64, up 31.7% from $5.80 in fiscal 2023. 2025 EPS growth is seen at around 13%. Google Cloud is seeing a 28% revenue increase to almost $11bn, but the key for the longer term is AI developments and the search moat. Can Alphabet do enough to defend its moat – its dominance of search advertising – as AI ushers in radical changes in how people use the internet?

Bank of Japan Expected to Hold Rates Steady

BoJ is expected to hold rates steady this week. Headline Tokyo inflation slowed to 1.8%, and the election result suggests no real benefit from rushing things right now. But a lot depends on the outlook and it’s still a coin toss as to whether the BoJ hikes in December. USDJPY gapped higher after the election result and has held gains above 153, hitting resistance at the long-term 23.6% retracement.

Oil is coming off its worst day in two years after Israel’s limited strikes on Iran.

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