Markets Face Geopolitical Pressures, U.S. Inflation Data, and Tech Earnings
Global markets brace for a heavy macroeconomic and geopolitical week as rising U.S. bond yields, tech earnings, and Middle East tensions pressure equities.
Global financial markets face a packed week ahead as investors juggle critical geopolitical developments with a heavy macroeconomic calendar. Key pressure points continue to weigh on equity markets, led by persistently high oil prices and surging U.S. government bond yields.
AI Safety Concerns and Micron Earnings
Artificial intelligence safety concerns have returned to the spotlight following a series of cyberattacks on U.S. federal websites. In response, OpenAI announced a temporary freeze on training its new AI models. Meanwhile, trading sentiment in the tech sector will be heavily influenced by the fiscal fourth-quarter earnings report from semiconductor giant Micron, scheduled for release on Wednesday.
Geopolitical tensions remain a dominant driver for investors, who are reacting to U.S. President Donald Trump's rejection of an Iranian proposal to reopen the Strait of Hormuz. According to reports in the Wall Street Journal, Trump told his team that the United States is likely to resume military strikes against Iran following the midterm elections in November. Additionally, markets await further details regarding the recent meeting between Trump and Chinese President Xi Jinping, which concluded with a trade ceasefire extension through January 10.
Macroeconomic Data and Labor Market Focus
On the macroeconomic front, upcoming U.S. employment and inflation data will dictate interest rate expectations. The September employment report is slated for release on Friday, preceded by the JOLTS job openings survey on Tuesday and the ADP national employment report on Wednesday. Furthermore, the Federal Reserve's preferred inflation gauge—the Personal Consumption Expenditures (PCE) price index for August—will be published on Wednesday alongside the second estimate of second-quarter GDP growth.
In Israel, the Tel Aviv Stock Exchange (TASE) will operate on a shortened schedule during the intermediate days of the Sukkot holiday, closing at 14:25 instead of 17:25, with no trading session on Friday due to the holiday.
Tech Sector Resilience vs. Broader Market Strain
Dual-listed shares are expected to return from Wall Street with a negligible positive arbitrage gap of about 0.1%. Tower Semiconductor, Nova, and Ormat are projected to climb between 2% and 3%, while Palo Alto Networks is set to retreat by over 3%. Teva and Elbit Systems are anticipated to drift lower by approximately 1%.
The TASE concluded the previous week in negative territory: the TA-35 index shed about 1.1%, the TA-90 dropped roughly 3%, and the TA-125 lost approximately 1.5%. Month-to-date, the TA-35 has gained about 2.5%, the TA-90 fell by 3%, and the TA-125 advanced by roughly 1%.
"The major indices held up nicely, but the average stock did not," said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management. "Beneath the surface, there has been some recent erosion."
Bond Yields and Currency Pressures
U.S. long-term government bond yields surged to multi-decade highs last week, intensifying market warnings of a potential correction of 10% to 20% from recent peaks. The 10-year Treasury yield settled at 5.16%, a level unseen since 2007, while the 30-year yield touched 5.5%, reaching its highest point since 2004.
Against the U.S. dollar, the Israeli shekel weakened by about 0.8% over the past week, with its continuous rate closing around 3.05 NIS per dollar, driven by the greenback's global strength and rising U.S. interest rate expectations.
