AI Cost Concerns Weigh on Apple, Amazon Earnings Anticipation

Apple and Amazon are set to report earnings today amid investor concerns over rising AI-related costs, following Microsoft's and Meta’s warnings about increased spending in this area. In Europe, attention remains on bank earnings from BNP Paribas, SocGen, and ING, while the ECB assesses prospects for further rate cuts as inflation cools. In Japan, the Bank of Japan held rates steady, with traders monitoring potential impacts from the upcoming US election and macroeconomic data.

Equities

The FTSE 100 fell by 0.7% on Wednesday, hitting its lowest point since early August, as the UK budget announcement brought the largest tax increases in over 30 years, primarily impacting the healthcare sector. AstraZeneca’s shares dropped by 2.8% as its China president became the subject of an investigation, while GSK’s shares fell by 3% following a warning of decreased vaccine sales for the year due to underwhelming demand for its respiratory and shingles vaccines.

Spirits maker Diageo saw a 2.6% drop after Italian counterpart Campari missed third-quarter earnings estimates, weighing on the sector overall. Midcaps gained ground as investors deemed the budget less harsh on businesses than expected, with the FTSE 250 up by 0.3%. Standard Chartered rose by 4% following news of its plans to double investment in its wealth unit and reduce retail banking operations, boosting future performance targets.

In the US, Wall Street’s main indices closed lower ahead of upcoming corporate earnings. The Dow Jones fell by 0.22%, the S&P 500 by 0.33%, and the Nasdaq by 0.56%. Chip stocks weighed heavily on the tech sector, with Advanced Micro Devices and Qorvo plunging by 10.6% and 27.3%, respectively, on dismal forecasts. Super Micro Computer took a 32.6% hit after Ernst & Young resigned as its auditor. Nvidia’s shares also dropped by 1.4%.

While tech stocks struggled, Alphabet rose by 2.8%, offsetting some of the losses after it surpassed revenue and profit expectations for the third quarter. Microsoft and Meta also beat quarterly revenue projections, though their influence was muted compared to Alphabet’s boost.

Among US companies, Eli Lilly’s shares dropped by 6.2% after missing sales forecasts for its popular diabetes and weight-loss medications. Starbucks reported a decline in quarterly sales post-market close due to weak global demand.

Forex & Commodities

The yen held steady after the Bank of Japan maintained its ultra-low interest rates, trading at around 152.83 per US dollar following marginal gains. The BOJ’s statement avoided hints of delaying potential future hikes, despite recent political changes in Japan, and market attention remains focused on Governor Kazuo Ueda’s briefing for insights on future policy moves.

The US dollar stayed firm against major currencies, with the dollar index flat at 104.1. This calm follows a series of gains for the greenback amid elevated US Treasury yields and bets on potential election outcomes. The euro was down slightly to $1.0852, while sterling traded at $1.2956. Meanwhile, the Australian dollar softened after retail sales data for September rose only 0.1%, undercutting analyst expectations of a 0.3% rise.

Gold prices climbed to a record high of $2,790.15 per ounce, fuelled by investor demand ahead of US elections and economic data due later this week. The precious metal, up nearly 6% for October, has become a preferred hedge amid economic and geopolitical uncertainties.

Oil prices gained ground, with Brent crude futures up 0.65% to $73.02 a barrel. This rise follows unexpected declines in US gasoline and crude inventories, which signalled stronger demand. Additionally, reports suggesting that OPEC+ may delay a planned production increase supported prices, bolstering expectations of a potential recovery in the oil market.