Oct 12 (Reuters) – A look at the day ahead in European and global markets from Wayne Cole.
There’s been much confusion in oil markets this morning as US President Donald Trump announced an energy “ceasefire” between Ukraine and Russia, which came as a surprise to the former and lacked confirmation from the latter.
Analysts suspected Trump was hoping to make a deal real by simply announcing it, without actually having an agreement, particularly as Russia continued to hit Ukraine’s power infrastructure on the weekend. Kyiv has been offering just such a ceasefire for months, but the Kremlin never showed any interest in taking it up.
Note Ukraine is having a real success hitting Yandex data centres in Russia, knocking a huge hole in the internet, and all sorts of apps, guidance and banking services. The number of Russian bots online has also plunged.
Trump’s sudden announcement was part of his proposal that Russia increase its exports of diesel to the US and world markets, which would seem to be a stretch given Ukrainian strikes on Russian refineries mean the country does not have enough diesel for its own needs.
The US is also the largest exporter of diesel in the world, so why would it need to import any? It also happens to be illegal for the US to import energy from Russia while the war is still running. And the amounts of diesel involved are tiny in comparison with US needs, with the first 300,000 tons promised not even a single day’s use.
Still, the mere chance there could be more supply from Russia saw Brent slip almost 2% to around $103.00 a barrel in very choppy trading.
A holiday in Japan and a partial holiday for US markets also made for thin trading conditions and mixed outcomes. Thus Asian shares were mostly lower, while US and European stock futures edged higher. The dollar eased a touch, while gold nudged up.
The earnings season kicks off with major US banks reporting from Tuesday onwards and expectations sky-high thanks to AI-related profits. Around 70% of S&P 500 companies report this month, with most of the hyperscalers out in the last week of October.
Average expectations are for 30% EPS growth, with companies benefiting from AI infrastructure spending accounting for over 50% of that growth, while hyperscaler capex is seen rising 116% y/y. Analysts expect less of a boost from companies’ equity stakes in the quarter, though tariff refunds amounted to $69 billion in Q3 and should provide a tailwind to earnings.
The major data hurdle will be US CPI on Wednesday, where a hotter headline of 3.7% should be balanced by a cooler core of 2.5%. Any upside surprise would jolt markets as futures have trimmed the chance of a rate hike this month to just 18%.
Key developments that could influence markets on Monday:
– Appearances by First Deputy Governor of the Riksbank Aino Bunge, Fed Bank of Cleveland President Beth Hammack
(Editing by Saad Sayeed)
