Markets prepare for busy week as Magnificent 7 saddle up; Fed cut eyed

New Zealand might be on holiday for the long Labour weekend, but it’s a busy week ahead, with Microsoft, Apple, Amazon, Alphabet and Meta Platforms saddling up to report their latest quarterly earnings in a season which has largely beaten analysts’ expectations so far.

And while earnings season will keep people busy, the Federal Reserve is expected to deliver another rate cut when the US central bank reviews policy this week after officials managed to deliver September inflation figures on Friday despite the ongoing federal government shutdown.

Meanwhile, US President Donald Trump will meet his Chinese counterpart Xi Jinping as trade tensions between the superpowers settle down, with a meeting over the weekend setting out a framework for the Thursday discussion.

And while New Zealand is relaxing its climate reporting regime, Exxon Mobil is challenging California’s, calling the framework misleading and counterproductive.

Ever higher

Stock markets rallied on both sides of the Atlantic on Friday as investors were buoyed by the cooling tensions between the US and China and as more benign US inflation data fuelled expectations for the Federal Reserve to keep lowering the benchmark interest rate.

The Fed is expected to cut the federal funds rate a quarter point to a range of 4%-to-4.25% when it meets on Wednesday in the US, while the European Central Bank is predicted to keep its benchmark rate at 2% at its Thursday meeting.

The kiwi dollar traded at 57.49 US cents at 7am in Auckland from 57.52 cents last week, and was little changed at 49.45 euro cents from 49.54 cents on Friday.

Ford Motor Co led the S&P 500 higher on Friday, jumping 12% after strong sales helped profit more than double in the latest quarter, while crypto firm Coinbase global advanced 9.8% following a lift in its target price by JPMorganChase analysts.

The S&P 500 climbed 0.8% on Friday to take its weekly gain to 1.9%, while across the Atlantic, the UK’s FTSE 100 was up 0.7% on Friday and Germany’s DAX 30 increased 0.1%, taking their respective weekly advances to 3.1% and 1.7%.

Investors have taken heart from a better-than-expected earnings season with 29% of the S&P 500 companies reporting their results. Of that, 87% have beaten earnings expectations, according to FactSet analysis.

That momentum will be tested when five of the mega-cap Magnificent 7 companies report this week, with Microsoft, Apple, Alphabet Amazon and Meta in the calendar.

The tech majors have been the driving force behind investment in artificial intelligence, with Tesla last week reporting a decline in quarterly earnings largely on its increased spending on research and development.

Not just magnificent

Among other companies scheduled to report are drugmaker Eli Lilly, payments firm Visa and oil majors Chevron and Exxon Mobil, the latter of which has filed a complaint in the US District Court for the Eastern District of California challenging two state laws requiring firms to disclose climate greenhouse gas and climate-related financial risks.

The oil major said it already reports emissions and climate risks voluntarily, and that the Californian state’s frameworks are misleading and counterproductive.

Meanwhile, US President Donald Trump has kicked off his Asia tour, where the highlight for investors is his meeting with China’s Xi Jinping on Thursday amid the heightened trade tensions between the superpowers. US Treasury secretary Scott Bessent said negotiations over the weekend were positive, and that there’s a successful framework for the leaders’ discussion.

That positive tone is set to carry over to the antipodes, with Australian futures pointing to a 0.3% gain for the S&P/ASX 200 index when trading begins across the Tasman. New Zealand markets are closed for the Labour Day holiday.

Local shareholders will be wearing out their shoe leather, with 10 annual meetings scheduled in the four-day week, starting with Rua Bioscience on Tuesday.

Freightways’ meeting on Thursday will offer a gauge on the state of the economy, with the courier company often seen as a bellwether for activity, as will ANZ’s business and consumer confidence surveys on Thursday and Friday.

And Fonterra Cooperative Group’s farmer-shareholders will vote on whether to accept the $4.22 billion offer from France’s Lactalis to buy its Mainland consumer business at their special meeting on Thursday.

Reporting by Paul McBeth. Image from Maxim Hopman on Unsplash.