Markets ease lower, as attention turns to big tech earnings

• Markets lower as markets weigh up prolonged Israel offensive
• Big tech earnings set to dominate
• Strong start to Q3 earnings season

Equity markets throughout Europe followed their Asian counterparts lower as geopolitical fears and elevated treasury yields continue to put downward pressure on stock valuations. Anticipation of a potential weekend ground offensive by Israel had help drive energy markets higher. However, we are seeing that move unwind somewhat in early trade today, with Israel taking their time ahead of a potentially protracted push. Nonetheless, the timing around when the ground offensive occurs should be secondary, with claims of a potential multi-month conflict instead providing the basis for continued uncertainty into year-end.

Today brings a slow start to a busy week, with a raft of economic and earnings data due for release in the coming days. While markets continue to be weighed down by geopolitical risks and concerns around rising yields, the role played by earnings should intensify this week as some of the tech giants step up to bat. 2023 has seen an overreliance upon a handful of names to drive market upside, with speculation over potential AI revenues helping to lift valuations. While there is hope that we will continue to see AI related earnings increase for the likes of Microsoft, there is a fear over the wider implications if they fall short of expectations.

With 17% of the S&P 500 having reported thus far, we have seen strong growth for both sales (5.8%) and earnings (4.7%). However, Friday’s Chevron and ExxonMobil earnings could change that given the expectations of steep year-on-year revenue weakness for the energy sector. One notable area of strength has been the consumer staples segment, lifting hopes of strong retail spending ahead of Amazon.com earnings.