US inflation meets bank earnings

Global markets begin the week balancing optimism about corporate earnings against elevated borrowing costs, energy prices and questions surrounding the AI investment boom.

Wall Street recovered on Friday following a volatile week for technology stocks, while oil and Treasury yields remained elevated. Softer US consumer confidence and rising inflation expectations added to uncertainty over the Federal Reserve's next move.

This week brings US consumer and producer inflation, retail sales, Australian employment figures and Chinese economic data. A busy corporate earnings calendar, led by major US banks and semiconductor companies, will also provide fresh insight into economic conditions and investment spending.

Wall Street rebounds after AI volatility

US equities finished Friday higher as technology shares recovered from the previous session's sell-off. The S&P 500 gained 0.59% to close at 7,811.54, while the Nasdaq Composite rose 0.64% to 27,366.17. The Dow Jones Industrial Average advanced 423.31 points, or 0.83%, to 51,654.95. For the week, the S&P 500 gained approximately 1.2%, the Nasdaq added 0.6% and the Dow rose 0.9%.

Software and technology stocks led Friday's recovery. Palo Alto Networks gained approximately 5%, while CrowdStrike advanced 4% and Palantir Technologies rose 5%. Microsoft added around 2% and Amazon gained 3%. However, concerns over the sustainability of AI investment remained an important source of volatility. Earlier reports suggested that OpenAI's annualised revenue stood at $50 billion at the end of September, below a previously reported figure of $68 billion. Subsequent clarification indicated that the higher figure included gross revenue from partners.

The discrepancy prompted investors to reassess expectations for AI-related revenue growth and the substantial infrastructure spending supporting the sector. Thursday's sell-off pushed the Nasdaq down more than 1%, its largest daily decline since mid-August. The week's movements highlighted how sensitive technology valuations had become to changing assumptions about AI revenue, borrowing costs and future returns.

SpaceX deal pressures telecommunications stocks

A major telecommunications announcement added to the week's individual stock volatility. SpaceX agreed to acquire a nationwide spectrum portfolio, raising expectations of increased competition in the US wireless market. SpaceX shares gained approximately 1% following the announcement, while major telecommunications companies came under pressure. Verizon declined sharply, falling more than 8% on Friday, while AT&T and T-Mobile also weakened.

The reaction reflected concerns that SpaceX's expansion could challenge existing telecommunications providers and place additional pressure on pricing, customer acquisition and future investment requirements. The development added another dimension to the technology sector's outlook, with competition and capital expenditure remaining important considerations for investors.

Oil remains elevated despite supply developments

Energy markets remained volatile as geopolitical risks continued to affect expectations for global supply. WTI crude finished Friday near USD92 per barrel, while Brent remained above USD104.

Prices eased after settlement following President Donald Trump's announcement that Russia had agreed to supply additional diesel to global markets. The proposed agreement included an initial supply of more than 300,000 tonnes, followed by 500,000 tonnes in November and further deliveries. Diesel markets had previously tightened following Ukrainian attacks on Russian refineries and disruptions linked to the conflict in the Middle East.

Shipping risks around the Strait of Hormuz also remained significant, with reports of tanker attacks and elevated freight costs affecting transport capacity. The developments created competing pressures for oil prices. Additional diesel supplies could provide some relief, while continued geopolitical uncertainty and infrastructure disruptions could limit that effect. For financial markets, energy prices remain an important influence on inflation expectations and the outlook for central bank policy.

Treasury yields remain near multi-year highs

US government bond yields continued to reflect concerns over inflation and the possibility of prolonged restrictive monetary policy. The benchmark US 10-year Treasury yield traded near 5.26% on Friday, following a volatile week that saw yields retreat from their highest levels since 2002. The yield declined approximately five basis points over the week, although borrowing costs remained elevated by historical standards.

Markets were pricing an approximately 81% probability that the Federal Reserve would leave rates unchanged at its October meeting, while expectations for another increase in December remained significant.

The US Dollar Index traded around 102.1, near its highest level since April 2025. Gold recovered towards US$4,180 an ounce on Friday as lower oil prices and retreating Treasury yields supported non-yielding assets. These movements reflected the balance between persistent inflation concerns and expectations that policymakers could pause before considering further tightening.

US consumer sentiment deteriorates

US consumer confidence weakened further in early October, highlighting the pressure facing households. The preliminary University of Michigan Consumer Sentiment Index fell to 46.3, its lowest level since May and below market expectations.

The Current Economic Conditions Index declined to 44.7, reflecting worsening assessments of household finances and purchasing conditions. Inflation expectations also increased. Year-ahead inflation expectations rose to 4.7%, while longer-term expectations reached 3.5%.

Lower-income households and consumers with smaller investment portfolios reported particularly sharp declines in sentiment, reflecting their reduced capacity to absorb higher prices and borrowing costs. The deterioration raised questions about whether household spending could remain resilient as inflation and financing pressures persist. This week's retail sales figures will provide another indication of whether weaker sentiment is translating into changes in consumer behaviour.

Canadian employment weakens

Canada's labour market showed further signs of slowing. Employment fell by 68,300 in September, compared with expectations for an increase of approximately 7,000. The unemployment rate edged up to 6.5% from 6.4%, while employment declined across both full-time and part-time positions. Public sector employment fell by approximately 70,000, contributing significantly to the monthly decline. The weaker figures reinforced expectations that the Bank of Canada could leave interest rates unchanged at its next policy meeting.

Canadian government bond yields declined following the release, while the Canadian dollar weakened towards 1.43 against the US dollar. The data highlighted the challenge facing central banks as inflation risks remain elevated while parts of the economy show signs of weakening.

US inflation and spending take centre stage

Wednesday's US Consumer Price Index release will provide the week's first major update on inflation. Headline and core CPI will be closely watched for evidence of whether price pressures are becoming more persistent. Core inflation, which excludes food and energy, can provide additional insight into underlying price trends. Thursday brings the Producer Price Index and retail sales figures, allowing investors to assess inflation at the business level alongside consumer spending.

The combination is particularly important following the decline in consumer sentiment and increase in household inflation expectations. Stronger-than-expected inflation could reinforce expectations for additional Federal Reserve tightening, potentially influencing Treasury yields, the US dollar and equity valuations. Conversely, softer price growth alongside resilient consumer spending could ease some concerns over the economic outlook.

Bank earnings test financial-sector resilience

The US corporate earnings season gathers momentum this week, led by several of the country's largest financial institutions. JPMorgan Chase, Goldman Sachs, Wells Fargo and Citigroup are scheduled to report on Tuesday, followed by Bank of America and Morgan Stanley on Wednesday. Results will provide insight into lending activity, deposit trends, credit quality and trading revenue. Elevated interest rates can support some forms of banking income, but they can also increase funding costs and place pressure on borrowers. Investors will therefore be watching whether banks are experiencing changes in loan demand, credit losses or customer financial conditions. Trading revenue will also be an important area of focus following the recent volatility across equities, bonds and currencies. Expectations suggest Wall Street's largest banks could generate nearly $19 billion in combined stock-trading revenue for the quarter. The results may offer an early indication of how companies and consumers are managing current financial conditions.

Semiconductor earnings put AI demand in focus

Technology earnings will provide another test of investor confidence following last week's AI-related volatility. ASML is scheduled to report on Wednesday, followed by Taiwan Semiconductor Manufacturing Company on Thursday. Both companies play important roles in the global semiconductor supply chain. Their results and guidance could provide insight into demand for advanced chips, manufacturing equipment and AI infrastructure investment. Investors will be examining whether customer orders and capacity expansion plans continue to support expectations for long-term growth. Given the scale of investment being committed to AI, management commentary on demand, capital expenditure and future production could influence sentiment across semiconductor stocks and the wider technology sector.

Australian jobs and RBA minutes shape rate expectations

Australian economic releases will bring monetary policy expectations into focus. The RBA's September meeting minutes are due Tuesday, offering more detail on policymakers' assessment of inflation, economic activity and the interest-rate outlook. Thursday's employment report will provide a fresh indication of labour-market conditions. Employment growth and the unemployment rate are particularly relevant because labour-market strength can affect wage pressures and domestic demand. A stronger-than-expected employment report could reinforce expectations that restrictive policy will remain necessary. Weaker employment growth could raise questions about whether higher borrowing costs are beginning to weigh more heavily on the economy. The releases could influence the Australian dollar, government bond yields and the ASX 200.

Chinese data and energy reports assess global demand

China's inflation and trade figures are scheduled for Wednesday, providing further evidence of domestic price pressures and external demand. Consumer and producer inflation can offer insight into spending conditions and industrial profitability, while exports and imports help assess trade activity. The releases are important for Australian markets because China remains a major destination for Australian commodity exports. Stronger import demand could support sentiment towards industrial commodities and resource companies, while weaker figures may raise concerns about economic momentum. Energy markets will also receive updates from OPEC and the International Energy Agency. The reports could provide further information on supply, demand and the outlook for oil inventories following recent geopolitical disruptions.

Monday 12 October

• Japan: Sports Day, equities closed
• Canada: Thanksgiving, markets closed
• US: Federal Holiday, stocks open
• India: CPI

Market holidays in Japan, Canada and the US may affect trading activity and liquidity across some instruments. India's CPI release will provide an update on inflation in one of Asia's largest economies.

Tuesday 13 October

• Australia: RBA Minutes
• Australia: NAB Business Confidence and Conditions
• Japan: PPI
• UK: BRC Retail Sales
• US: NFIB Business Optimism
• US: Existing Home Sales
• US: Budget Balance
• OPEC: Monthly Oil Market Report
• IMF: World Economic Outlook

Earnings: JPMorgan Chase, Johnson & Johnson, UnitedHealth Group, Goldman Sachs, Wells Fargo, Citigroup, Domino's Pizza and Albertsons

The RBA minutes will offer further insight into Australian monetary policy, while US housing and business surveys will help assess economic activity. Major bank earnings will provide an early test of financial-sector performance.

Wednesday 14 October

• China: CPI and PPI
• China: Trade Balance, Exports and Imports
• Singapore: MAS Monetary Policy Statement
• Eurozone: Industrial Production
• US: CPI and Core CPI, plus Real Earnings
• IEA: Oil Market Report
• US: API Oil Inventories

Earnings: ASML, Bank of America, Morgan Stanley, BlackRock, Fastenal, State Street and Progressive

US inflation will be the central focus, particularly given recent increases in consumer inflation expectations. Chinese trade and inflation data will provide insight into demand conditions, while ASML's earnings could influence the semiconductor sector.

Thursday 15 October

• Australia: Employment and Unemployment
• UK: GDP, Industrial and Manufacturing Production, and Trade Balance
• US: Retail Sales
• US: PPI and Core PPI
• US: Initial Jobless Claims
• US: Empire State and Philadelphia Fed Manufacturing Surveys
• US: EIA Oil Inventories

Earnings: TSMC, Charles Schwab, Prologis, BNY, US Bancorp, PNC Financial, Marsh, Interactive Brokers, J.B. Hunt and Alcoa

Australian employment figures will provide an important update ahead of future RBA decisions. US producer inflation and retail sales will help investors assess cost pressures and consumer demand, while TSMC's results will provide insight into semiconductor investment.

Friday 16 October

• Eurozone: CPI and Core CPI (Final)
• Eurozone: Trade Balance
• US: Industrial Production, Manufacturing Production and Capacity Utilisation
• US: Import and Export Price Indexes

Earnings: Travelers and Truist Financial

Final eurozone inflation figures will offer further detail on regional price pressures. US industrial production and capacity utilisation will provide insight into manufacturing activity and the extent to which companies are using available production resources.

Several developments could influence whether markets extend their recovery or face renewed pressure this week:

• US inflation and Federal Reserve expectations: CPI and PPI readings could influence expectations for further interest rate increases, affecting bonds, currencies and equity valuations.
• Consumer demand and economic resilience: Retail sales and confidence indicators will help assess whether households can sustain spending despite elevated prices and borrowing costs.
• Bank earnings and credit conditions: Results from major financial institutions could reveal whether lending, credit quality and funding conditions are beginning to weaken.
• AI and semiconductor demand: ASML and TSMC earnings may provide evidence of whether investment in advanced chip manufacturing continues to support growth expectations.
• Energy supply risks: Developments involving Russian diesel supplies and Middle East shipping could affect oil prices and inflation expectations.
• Australian employment and Chinese demand: Labour-market figures and Chinese trade data could influence the outlook for the Australian dollar, commodities and regional equities.

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