Dubai: The ongoing quarterly earnings will be detrimental for markets this week and analysts opine that volatility may return to the forefront as global stocks are currently trading at record highs.
Multiple analysts currently gauge that after the recent turbulence, markets are likely to close out the final week of the third quarter with another bout of volatility.
Global investors are assessing whether more volatility is ahead because of surging global energy prices, which could push up inflation, hurt profit margins and put stress on consumer spending.
US stocks rebound after Monday’s losses
In the US, stocks rebounded last week after Monday’s losses left the S&P 500 down 5 per cent from its record high hit in September. Despite September’s pullback, the S&P 500 remains up 17 per cent so far in 2021.
Even as investors swooped in to buy the market’s latest dip, some strategists are pointing to risks that could come with jumping into equities. Some analysts noted that rising energy prices could put more upward pressure on bond yields. A rise in yields have churned stocks in the past weeks.
Energy costs have historically been a major detriment for inflation, and will be a key topic as firms worldwide report third-quarter results in the weeks.
Surge in oil prices continue
Oil prices have surged more than 25 per cent since late August, with Brent topping $80 a barrel and hitting three-year highs.
Analysts also opine that if oil prices keep rising toward $100 a barrel, it could continue to weigh on investor sentiment. Furthermore, natural gas prices in Europe have rocketed, causing unrest among leaders.
Stock markets rose to fresh record highs this week, as more companies continued to beat expectations, and by a wider margin than the average. Heading into the last week of October, major indices in key economies worldwide are still poised to finish the month with gains.
More earnings to keep coming in
Wading deeper into earnings season, investors can expect a steady flow of quarterly reports from more financial services and tech firms, as well as major pharmaceutical companies and automakers.
In the US, nearly 40 per cent of S&P 500 constituents are expected to report results this week, and so far the vast majority have beaten estimates.
Top global tech giants, including the FAAMG companies, namely Facebook, Amazon, Apple, Microsoft, and Google will all report this week, along with Twitter. E-commerce giant Amazon also reports quarterly earnings on Thursday.
Global stocks rise, US dollar strengthens
Global stock indexes mostly climbed last week with the US dollar also strengthening, boosted by better jobs and housing data in the world’s top economy, the US. The dollar index rose to 93.76, up 0.17 per cent.
While the Dow Jones Industrial Average steadied at 0.02 per cent, the Nasdaq Composite added 0.62 per cent. The pan-European STOXX 600 index lost 0.08 per cent and MSCI’s gauge of stocks across the globe gained 0.06 per cent towards the end of last week.
The US dollar was also supported as benchmark 10-year US Treasury yields rose to 1.683 per cent, the highest since May 13.
Bitcoin prices rise, central banks in focus
Bitcoin last fell 4.68 per cent to $62,904.60, but demand for the cryptocurrency has increased since the launch of the first US Bitcoin futures exchange-traded fund.
Investors are estimating that surging energy prices and tightening job markets will pressure top central banks to either raise interest rates or at least rein in the stimulus.