(Reuters) -Renewed trade tensions and talks between Washington, Beijing and Canada will dominate a week headlined by central bank decisions in the United States, Canada and Europe, while Argentina’s voters head to the polls.
Here’s all you need to know about the week ahead in world markets by Dhara Ranasinghe in London, Rodrigo Campos, Alden Bentley and Lewis Krauskopf in New York, and Kevin Buckland in Tokyo.
1/ A MID-TERM DRAMA
Argentina’s mid-term elections on Sunday are shaping up as a make-or-break moment for one of the emerging markets’ biggest reform stories.
Right-wing President Javier Milei is looking to strengthen his minority position after his inflation-crushing economic reform programme and deepening ties with Washington have delivered some of the best returns for emerging market investors since he took over in December 2023.
Yet U.S. President Donald Trump’s unprecedented backing, including direct intervention in FX markets, a $20 billion central bank swap line and the prospect of another $20 billion loan to shore up government bonds haven’t stopped the peso’s slide to record lows.
It might all get whisked away if Milei suffers a weak result, which could also stymie reforms, raising questions for investors on how to shape their long-term bets on the country.
2/IT’S AI, STUPID
Megacap tech and growth company earnings reports headline a massive week of U.S. corporate results that could shed light on the state of the effervescent “AI trade”.
Microsoft, Apple, Alphabet, Amazon and Meta Platforms – five of the “Magnificent Seven” megacap companies that dominate equity indexes – all report earnings.
One-third of S&P 500 constituents are set to report in the coming week alone, including drugmaker Eli Lilly, oil majors Exxon and Chevron and payment firms Visa and Mastercard.
Investors will also be scouring data for signs of the costs and impact of shifting U.S. trade policy. S&P 500 companies are estimated to have increased Q3 earnings by 9.2% from the prior year, with a greater-than-typical number of companies beating profit estimates so far, according to LSEG IBES data.
3/COUNTING ON A CUT
Markets are all but certain that the U.S. Federal Reserve will cut interest rates by a quarter-point when it concludes its meeting on Wednesday, and they are showing similar conviction for another trim in December.
Still, that year-end cut might be less clear if the government shutdown doesn’t end, leaving data-guided policymakers driving blind without official economic indicators.
Meanwhile, Trump is expected to meet with Chinese President Xi Jinping on Thursday as part of a trip to Asia and on the sidelines of the Asia-Pacific Economic Cooperation CEO Summit.
Their long-awaited rendezvous had been called into question following an escalation in trade tensions and a standoff over China’s restrictions on rare earth exports, as well as U.S. curbs on technology exports amid Trump’s threat to impose 100% tariffs, all of which remain a market vexation – and a consideration for the Fed.
4/ IT’S NOT ALL ABOUT THE FED
That’s right, the Bank of Canada is also expected to cut rates for a second month running on Wednesday with a pick-up in inflation not expected to stand in its way, although Trump’s announcement that all trade talks with the country are terminated will cast a cloud.
And the European Central Bank ends a meeting on Thursday, although it appears to be in “nothing to see here” mode, with a Reuters poll of economists predicting it is likely to leave rates unchanged at 2% for a third straight meeting and remain on hold until the end of the year. Traders see a roughly 65% chance of a quarter-point cut by mid-2026 given the downside risks to economic growth.
Headwinds are looming, however. Apart from trade tensions, there is still French political turbulence and an election in the Netherlands on Wednesday dominated by populist cross-currents. So ECB chief Christine Lagarde may be pressed on whether the bloc remains in a “good place.”
5/HIKE ON HOLD?
The Bank of Japan is likely to forgo a rate hike next Thursday in favour of a move in December or January, but not due to pressure from the country’s dovish new premier.
Two-thirds of analysts polled by Reuters say fiscal and monetary dove Sanae Takaichi, who ascended to the top job on Tuesday, won’t delay monetary tightening, although her oft-repeated view is that the central bank should be aligned with government policies.
Instead, analysts and traders point to BOJ Governor Kazuo Ueda’s consistently cautious tone, particularly on potential tariff fallout, even with his board performing a conspicuously hawkish pivot last month.
And his desire to see more data – including U.S. Christmas shopping trends – has most analysts eyeing a December hike at the earliest.
(Graphics by Vineet Sachdev, compiled by Karin Strohecker, editing by Hugh Lawson)
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