Market snapshot: watch out for banana skins

US markets are braced for a full-on assault, with the coming week littered with potential banana skins.

At an economic level, there will be further clues as to whether the recent spike in bond yields has been justified, and whether the Federal Reserve might even be considering pausing its interest rate cutting cycle given a robust backdrop.

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Quite apart from an advance estimate of GDP which is expected to show annualised growth of 3%, the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE), is also due. The expectation is that annual core PCE, which excludes energy and food measures, will have hit 2.6% in September compared to 2.7% in August, with the monthly reading rising from 0.1% to 0.3%.

The week is then rounded off with the non-farm payrolls report, where it is estimated that 140,000 jobs will have been added in October, compared to 254,000 the previous month, with unemployment unchanged at 4.1%.

Nor will there be any respite on the corporate front, as the quarterly earnings season hits top gear. There are updates expected from the likes of Ford Motor Co (NYSE:F), McDonald's Corp (NYSE:MCD), PayPal Holdings Inc (NASDAQ:PYPL), Caterpillar Inc (NYSE:CAT), Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX), where the recent oil price decline will have had an impact. Geopolitical concerns, ample supply and the potential of lacklustre demand from China have all weighed, leaving the commodity down by 5.2% this year.

In addition, the strength of the mega cap technology stocks will be given a further stern test, as earnings numbers are due from Google-owner Alphabet Inc Class A (NASDAQ:GOOGL), Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN). This is particularly pertinent given the rise of the Nasdaq index, which hit its own record high on Friday, having witnessed the Dow Jones and S&P500 testing record levels during the course of this month.

As such, and ahead of the raft of numbers which will need to be navigated this week, the main indices remain in rude heath in the year to date, with the Dow Jones having added 11.7%, the S&P500 21.8% and the Nasdaq 23.4%.

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Asian markets were mostly positive overnight, with Japan returning to the spotlight after several weeks of almost exclusive focus on China.

The Nikkei rose amid some political uncertainty as the ruling party lost its majority over the weekend, which had been largely expected by the market and was therefore less unsettling than might otherwise have been the case. In addition, the subsequent weakness of the yen against the US dollar, itself on a roll given the potential for higher for longer interest rates, lifted Japan’s exporters with the likes of Toyota Motor Corp ADR (NYSE:TM) and Sony Group Corp ADR (NYSE:SONY) adding 4% and 2% respectively.

The week ahead in the UK will also bring its own challenges with the Budget announcement on Wednesday. The overarching mood music of late has been slightly despondent, given the new government’s mixed messages on both austerity and growth.

This comes despite an underlying improving economy, which has shown some resilience in face of these challenges and, for the more domestically focused FTSE250, an increase in Merger and Acquisition activity which has pointed towards the value to be found within an index rife with stocks at undemanding historical valuations. The pressure on this index has erased some of the gains seen in previous months, although the FTSE250 remains ahead by 5.8% so far this year.

The FTSE100 made some hesitant progress in opening exchanges, weighed down by inevitable weakness in the oil majors given the further decline of “black gold” overnight. BP (LSE:BP.) and Shell (LSE:SHEL) lost 1.7% and 1.9% respectively, with the latter scheduled to provide its latest quarterly update on Thursday, and where refining margins, shareholder returns and any progress on renewable energy will be in focus.

In the meantime, the oil price weakness provided a boost for the airlines in early trade, propelling easyJet (LSE:EZJ) and International Consolidated Airlines Group SA (LSE:IAG) by 4% and 3% respectively.

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This week will also herald the closure of the banking reporting season as HSBC Holdings (LSE:HSBA) and Standard Chartered (LSE:STAN) come to the plate. These banks have had a positive run of late although their share price gains pale into significance compared to Lloyds Banking Group (LSE:LLOY), Barclays (LSE:BARC) and NatWest Group (LSE:NWG) over the last year. However, over the last three years these Asian-focused banks have outperformed, lending further weight to positive longer-term prospects in the region.

In the meantime, the primary index remains ahead by 6.8% in the year to date, standing by as an attractive investment destination given potential weakness elsewhere.