Market news today - will tech giants steady market nerves?

THERE was little for investors to cheer as the week got under way, with global markets dipping to their lowest level since April and haven assets rising in response to the Israel-Hamas war.

The MSCI World Index fell on opening on Monday, reflecting the widespread caution affecting asset prices. European markets were broadly stable with the FTSE 100 0.4% lower in early trading. In the US, futures pointed to a marginally lower opening for the S&P 500.

The war between Israel and Hamas - and fears that it will widen in the region - has added to the uncertainty for investors but it appears to be concerns on interest rates which are making the weather. Comments from Federal Reserve Chairman Jerome Powell last week suggested that the fight against inflation was still in its infancy, and that further interest rate rises may be necessary.

Powell hailed the resilience of the US economy but warned that this meant the Fed may have to tighten further.

That pushed yields on bonds higher, including on benchmark 10-year Treasuries which now yield 5% - a psychologically important level. The Fed meets again next week, and markets are expecting it to keep rates on hold - but commentary will be closely watched for signs of the next move.

There will be more news on the strength of the US economy this week with gross domestic product data out on Wednesday. A significant increase in growth is expected for the third quarter of the year. Flash Purchasing Managers’ Index numbers for services and manufacturing due on Tuesday will add to the news flow. If growth comes in more strongly than expected expectations for rates and bond yields may rise further.

Higher bond yields are typically bad news for gold prices. The metal pays no income so higher rates elsewhere tends to put it at a disadvantage. Yet gold prices have been on the rise and breached the $2,000 level last week. That appears to be driven by gold’s status as a safe haven during times of geopolitical stress.

The direction for equity markets is also being set in large part by monetary policy - but earnings at companies still matter. Investors will get an update on some of the world’s largest companies this week. Microsoft and Google parent Alphabet provide earnings numbers on Tuesday, Facebook parent Meta updates on Wednesday with Amazon on Thursday. Expectations for all of them are high.

Microsoft is expected to update the market on how artificial intelligence is adding to its bottom line with hopes raised after brokers improved their rating on the stock. Alphabet is expected to report revenue rising by more than 10% and a big increase in earnings-per-share.

Facebook’s owner Meta could be in for a tougher time with the markets betting on a strong recovery at the social network. Earnings-per-share is forecast to bounce by more than 100% and costs will be in focus as Meta works to recover ground lost in a miserable 2022.

Amazon is expected to add to its momentum this year with strong top-line revenue growth and a leap in earnings-per-share.

Needless to say, any disappointment in the numbers this week is likely to knock confidence more widely. One way or the other investors should expect more bumps as the week unfolds.

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