Global markets gear-up for epic week of trade talks, central bank meetings and US earnings

It doesn’t get much bigger than this: the week ahead will set the tone for the rest of the year in financial markets. All the big thematics are converging and could either rock market sentiment or boost it significantly. A Fed decision and a swathe of central bank meetings, US-China trade talks, and a week of US earnings that will see five of the Magnificent Seven companies report. It’s a collision of the three biggest drivers of the markets right now: US rate cuts, trade policy uncertainty, and US tech profits.

Hopes build of a US-China trade deal ahead of Trump-Xi meeting

US-China trade tensions are easing and the tit-for-tat brinkmanship that sparked the recent pull back on Wall Street and kept the markets locked in a range is settling down. The US has said that high level talks with China in Malaysia may yield a surprising comprehensive trade deal. US President Trump will be in Asia in the week ahead, with a meeting between him and Chinese President Xi all but locked-in. Such an event between leaders would likely not be scheduled if there weren’t some good news to try and sell. Amongst other things, China is likely to back down from their rare earth export curbs, and the US will likely unwind some tariffs and step back from threats of technology restrictions. 

The US Federal Reserve tipped to cut but focus is on the guidance

The US Federal Reserve is all but certain to cut interest rates this week, with the markets fully pricing in the move. The belated CPI data on Friday showed a better than expected outcome, revealing a decline in core inflation on an annual basis to 3.0% – down from 3.1% a month earlier and below the forecast of 3.1% for the month. That data was unlikely to shift the odds of a rate cut this week. But it could have had a bearing marginally on the odds for a December cut and the depth of expected cuts in 2026. It must be noted, inflation remains sticky and above the Fed’s target. However, the markets, for better or worse, believe the Fed will keep turning a blind eye to inflation in order to protect the labour market.

(Source: CME Group)

US earnings season hits high gear with Magnificent Seven earnings 

Company profits and US tech earnings growth is the floor beneath Wall Street’s bull market and the earnings season has been solid so far. FactSet data suggests the S&P 500 is on track to deliver over 9% earnings growth for the quarter. It all rests now on whether the Magnificent Seven cohort, five of whom – Alphabet, Amazon, Apple, Meta and Microsoft – report this week, deliver the goods. Going into the reporting period, analysts had forecast relatively robust 15% earnings growth for the group. While lofty, much like these companies' valuations, the Magnificent Seven have a history of vastly exceeding estimates. Last quarter, they were tipped to deliver earnings growth of roughly the same, but smashed expectations with 27% growth instead.

(Source: FactSet)