Asian Shares Cautious Ahead of Central Bank Meetings and AI Earnings

Oil Risks and AI Earnings Put Global Markets on Alert

Investors face a week of competing signals: energy prices remain elevated, central banks are weighing inflation risks, and major technology companies must show that AI spending can sustain earnings momentum.

Oil’s pullback offers only limited relief

Brent crude fell 1% to $115.48 a barrel, while US crude slipped 1.1% to $102.08. Reports of diplomatic efforts to de-escalate regional tensions helped ease prices, but the retreat followed a 6.2% weekly gain in Brent, which had reached its highest weekly close since mid-2022. Attacks in Saudi Arabia had raised concerns about energy supplies.

For markets, the distinction between a daily dip and a sustained change in supply risk matters. If oil remains expensive, it could add to inflation pressures even as it raises costs for businesses and households. That creates a difficult backdrop for central banks: easing policy could leave inflation less contained, while tighter policy could weigh on borrowing and demand. These are risks rather than certainties, and the path will depend partly on how energy prices develop.

Central banks confront a narrower policy choice

Japan’s Nikkei fell 0.8% after losing 4% last week, while South Korea’s market slipped 0.4% and has shed almost 19% so far this month. The broader Asia-Pacific index outside Japan eased 0.1%. The uneven moves reflect a market trying to price both regional risk and the possibility that interest rates may need to stay higher for longer.

Markets widely expect the US Federal Reserve to hold rates at its meeting, but imply an 80% chance of a hike in December. A rate increase in New Zealand is widely expected this week, while the Bank of Japan and European Central Bank are also expected to remain on hold for now. Those expectations could shift if inflation data or oil prices surprise investors.

The expected US core inflation reading is 3.1% for September, while economic growth is forecast at a brisk 3.2% annualised pace. Strong activity, partly associated in the report with data-centre spending, may complicate the case for rate cuts. The figures are forecasts, not confirmed outcomes, making the releases important tests of the current market view.

Technology earnings face a high bar

Results from Alphabet, Microsoft and Amazon are among the week’s key events, alongside reports from Intel and Sandisk. The figures will help investors judge whether heavy interest in artificial intelligence is translating into business momentum. Microsoft is expected to report revenue of $90.6 billion and adjusted earnings per share of $4.73; estimates for Amazon are $202 billion of revenue and EPS of about $1.97. Alphabet is expected to post $128 billion of revenue and EPS of $3.

With a third of S&P 500 companies due to report, the results may influence the broader equity mood. Strong numbers could support confidence in large technology firms, but investors will also be watching whether earnings justify expectations. Higher bond yields have already tested equity valuations: the 10-year US Treasury yield stood at 5%, below its 5.36% peak earlier in the month but still a significant consideration for investors assessing growth stocks.

Key Highlights

• Brent fell 1% to $115.48, after rising 6.2% last week amid supply concerns.
• Asian equities opened softer, with Japan and South Korea among the weaker markets.
• Central bank decisions and US inflation and growth readings could reshape rate expectations.
• Results from Alphabet, Microsoft and Amazon will test confidence in AI-linked earnings.
• The 10-year US Treasury yield was 5%, keeping borrowing costs and equity valuations in focus.

Investor Note: With oil, interest-rate expectations and major earnings all in play, investors may want to distinguish short-term market volatility from changes in underlying business performance. The key signals are whether energy pressures persist, inflation data alters the expected policy path, and technology companies’ results support their investment expectations.