Fears of an extended conflict in the Middle East are easing, leading markets to show a return to risk appetite.
Asian stocks have recovered some losses, and bond yields have increased.
Attention has now shifted from Iran-Israel tensions to corporate earnings and economic data to better understand the direction of the Fed policy and other central banks.
Gold and the dollar, considered safe-haven assets, have declined from recent highs, and crude oil prices have decreased due to the absence, for now, of the risk of a severe supply disruption.
On Friday, Iran stated that it has no intention of retaliating to the apparent Israeli drone attack within its borders, which followed an unprecedented Iranian missile and drone strike against Israel days earlier.
In this context, markets are starting the week focused on central banks, economic data, and quarterly results.
The benchmarks across Asia have regained some of last week’s losses in the absence of further escalation by Iran following Israel’s retaliation.
The Hang Seng index has outperformed, boosted by Chinese authorities’ measures to strengthen the city’s status as a financial center.
Investors are recalibrating their positions after stronger-than-expected US data forced the Fed to rethink its timeline for the first interest rate cut.
The release of macro updates throughout the week is likely to help fine-tune policy bets, including readings on US growth and the Fed’s preferred inflation measure.
This week, more than half of the top tech companies will report earnings, leaving investors questioning if these firms will meet the high expectations set for Artificial Intelligence.
The earnings of the top seven growth companies in the S&P 500 index – Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia, Meta Platforms Inc., and Tesla Inc.
– are on track to increase by 38% in the S&P 500 index in the first quarter, according to Bloomberg Intelligence.
Excluding these companies, the rest of the index’s profits are expected to decrease by 3.9%.
However, Tesla has had a challenging start to the year, with its shares falling over 40% due to declining sales, product strategy confusion, and further price cuts.
The company’s once-dominant position in the Chinese electric vehicle market is also under threat.
Tesla is expected to report a 40% drop in operating income and the first revenue decline in four years.
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