Global markets brace for Fed, Big Tech earnings and Bank of Canada decision

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Highlights

Federal Reserve expected to maintain rates with a hawkish tone as markets watch for signals of another increase by year-end amid persistent inflation.
Bank of Canada poised for its first rate hike in three years while SK Hynix surges 10% after net profit triples and unveils a $75 billion shareholder return plan.
Brent crude trades above $115 per barrel as U.S. weighs Iran strikes post-midterms, sustaining geopolitical pressure on energy prices.

Central banks and earnings crowd the calendar

As reported by Reuters, the main focus on Wednesday is the Federal Reserve, which is widely expected to deliver a hawkish hold while markets watch how Chair Kevin Warsh frames a likely pause in rate increases and whether policymakers still signal another move by year-end.

Rate markets remain relatively calm ahead of the decision, even as inflation stays above the Fed's 2% target and unemployment remains below 5% for more than five years. The debate now centers on whether the central bank needs to rethink what it considers neutral policy, with both headline and core inflation rising again and financial conditions still loose.

The Bank of Canada is also expected to raise rates for the first time in three years. Overnight, New Zealand's central bank narrowly voted to keep rates unchanged despite broad expectations for another increase, sending the kiwi dollar down more than 1%.

After the bell in the U.S., investors are also watching earnings from Microsoft and Alphabet, adding to a heavy flow of market-moving events within a single day.

Energy risks and regional signals shape sentiment

Market sentiment is being helped by continued strength in AI-related stocks, while SK Hynix jumps 10% overnight after reporting that net profit has tripled over the past year and outlining plans to return $75 billion to shareholders.

At the same time, energy markets offer little relief, with Brent crude continuing to push above $115 a barrel. Reports that the U.S. is considering resuming attacks on Iran after next week's midterm elections are keeping geopolitical pressure on oil prices.

In the UK, the government's annual budget appears less likely to jolt markets after finance minister John Healey signals no major changes to tax, spending or borrowing plans. Broader geopolitical tensions remain in focus as Qatari mediators present Iran with a new draft deal on Sunday aimed at ending the war with the U.S. and Israel, while Tehran is expected to respond by the end of the week.

In our earlier coverage of the S&P 500’s push toward 8,000, we noted that the AI-led rally was facing a tougher test from higher oil prices, elevated Treasury yields, and rising political uncertainty ahead of the midterm elections. The piece also flagged growing concentration risk—strength in a handful of megacaps masking weak breadth—and argued that third-quarter earnings would need to be exceptionally strong to justify further gains in the index.

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