Europe Rises as Oil Eases, US Futures Gain Into Fed Week

European shares opened higher on Monday, October 26, and US stock futures rose, as oil fell back from a six month high and investors turned to a week of central bank decisions and earnings from the biggest technology companies.

In London, the FTSE 100 opened up 48.28 points, or 0.5 percent, at 10,738.64, according to Alliance News reporting carried by Morningstar. The FTSE 250 rose 0.6 percent. In Paris, the CAC 40 gained 0.7 percent in early trade, and the DAX in Frankfurt rose 0.6 percent. A later market snapshot from FXStreet put the FTSE 100 up 0.47 percent at 10,740.61, the DAX up 0.72 percent at 25,363.23 and the CAC 40 up 0.80 percent at 7,845.14.

Oil gives back part of last week surge

Brent crude slipped 1.9 percent to 114.48 dollars a barrel, Reuters reported, and US crude fell 2.2 percent to 101.01 dollars. Brent had jumped 6.2 percent last week to its highest weekly close since mid 2022, after Houthi attacks in Saudi Arabia raised fears over energy supplies.

Traders linked the pullback to diplomacy. Qatari mediators were in Tehran on Sunday, October 25, as part of an effort to de-escalate regional tensions in coordination with the United States, Reuters reported. The Houthi group said on Monday it had attacked Saudi Arabia East-West crude oil pumping stations and Riyadh airport, but there was no immediate confirmation from Riyadh, Reuters said.

In Europe, the biggest early movers were company stories. Computacenter rose about 7 percent after it raised guidance, Genmab gained about 9.5 percent after Phase III data for its Rina-S cancer drug and an upgrade from JPMorgan, and Bayer rose about 3 percent, according to the FXStreet market snapshot. Galp fell about 8.5 percent as merger talks with Moeve collapsed, and Novartis fell about 3.5 percent after results for its remibrutinib drug disappointed. Moody's kept France at Aa3 with a negative outlook late on Friday, a decision that eased pressure on French government bonds after the 10 year yield breached 5.00 percent last week for the first time since 2002.

Asia closes cautiously after a hard week

Asian markets closed cautiously. Tokyo Nikkei 225 slipped 0.1 percent to 62,602.86, and the Kospi in Seoul dropped 1.1 percent to 5,494.29, the Associated Press reported. The Hang Seng in Hong Kong edged 0.2 percent higher to 23,137.93, the Shanghai Composite lost 0.4 percent to 3,673.83, and Australia S and P/ASX 200 shed 0.2 percent to 8,782.30.

The levels hide a rough month. The Nikkei dipped after losing 4.0 percent last week, Reuters reported, and the Kospi has shed almost 20 percent so far this month. Chinese blue chips lost 0.5 percent as the ruling Communist Party began its fifth plenum in Beijing, and Chinese stocks have now fallen for 11 weeks in a row amid concern over domestic demand, even as exports remain strong.

US futures rise into the Fed decision

At 5:19 a.m. Eastern Time on Monday, Dow E-minis were up 257 points, or 0.49 percent, S and P 500 E-minis were up 23.25 points, or 0.3 percent, and Nasdaq 100 E-minis were up 73 points, or 0.25 percent, Reuters reported. On Friday, the Dow had lost more than 650 points, the S and P 500 fell 0.5 percent and the Nasdaq Composite declined 0.2 percent.

About one third of S and P 500 companies report earnings this week, including Alphabet, Microsoft and Amazon, Reuters said. Their results will be watched for signs that heavy spending on artificial intelligence is paying off. "Strong AI demand alone may no longer be enough. Markets want evidence of monetization, margins and cash flow," said Charu Chanana, chief investment strategist at Saxo, quoted by Reuters.

Why it matters and what comes next

Four central banks meet this week. The Federal Reserve decides on Wednesday, October 28, the European Central Bank on Thursday and the Bank of Japan on Friday, with the Bank of Canada also meeting on Wednesday. Markets expect the Fed to hold its target range at 3.75 to 4.00 percent. The inflation pressure from oil is the risk in every room.

"The main message from global central banks grappling with this year's macroeconomic surprises is that a relatively shallow rate-hike cycle is underway," said Bruce Kasman, global head of economics at JPMorgan, quoted by Reuters. He said the large central banks are likely to remain on hold, while Canada should start its tightening cycle.