By Wayne Cole
SYDNEY, Oct 26 (Reuters) – Share markets got off to a cautious start on Monday as oil eased from six-month highs ahead of a week packed with central bank meetings and company earnings that will further test investor confidence in the AI boom.
Brent oil slipped 1.0% to $115.48 amid reports Qatari mediators were in Tehran on Sunday as part of an effort to de-escalate regional tensions in coordination with the United States.
Brent futures jumped 6.2% last week to their highest weekly close since mid-2022 as Houthi attacks in Saudi Arabia stoked concerns over energy supplies. US crude futures fell 1.1% to $102.08 a barrel. [O/R]
Japan’s Nikkei dipped 0.8%, after losing 4.0% last week, while South Korea fell 0.4%, having shed almost 19% so far this month. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%.
The inflationary pulse from oil is likely to alarm all the central banks meeting this week, with hikes seen as just a matter of time even if some hold for now.
“The main message from global central banks grappling with this year’s macroeconomic surprises is that a relatively shallow rate hike cycle is underway,” said Bruce Kasman, global head of economics at JPMorgan.
“G3 central banks are likely to remain on hold, but Canada should start its tightening cycle and first moves are expected from the UK and Sweden next month.”
New Zealand’s central bank is widely expected to raise rates on Wednesday. Markets assume the US Federal Reserve will stand pat, but imply an 80% chance it will pull the trigger in December. Much the same is priced in for the Bank of Japan and the European Central Bank.
A key reading on US core inflation should show cost pressures remained elevated at 3.1% in September, while the economy is forecast to have grown at a brisk 3.2% annualised pace thanks in part to furious spending on data centres.
“The Fed is set to skip raising rates at its October meeting but is likely to deliver a second hike in December,” analysts at Goldman Sachs said in a note.
“The most important risk is that oil futures are above our forecasts, largely reflecting concerns about potential further conflict with Iran,” they added. “The more extreme and long-lasting the energy shock becomes, the more Fed participants will worry that inflationary pressures could broaden.”
HYPERSCALERS TO TEST AI HYPE
On Wall Street, S&P 500 futures and Nasdaq futures both edged up 0.2%. In Europe, EUROSTOXX 50 futures firmed 0.2%, while DAX futures gained 0.1%.
