Tech Earnings Week Arrives, Major U.S. Stock Indexes Open Broadly Higher, Petrobras Plunges Over 17%

The tech giants' earnings season has officially begun, with global markets watching cautiously amid a tangle of multiple uncertainties.

The three major U.S. stock indices opened higher across the board, with the Dow up 0.2%, the S&P 500 up 0.25%, and the Nasdaq up 0.28%. Brazilian companies listed in the U.S. plunged, with XP down more than 52%, PAGSEGURO DIGITAL down more than 33%, Itaú Unibanco down more than 23%, and Petrobras down more than 17%. SK Hynix rose more than 2% as the company was reported to be preparing a shareholder return plan worth 50 trillion to 60 trillion won. Meta edged lower as the company seeks up to $95 billion in equity financing to support AI spending.

The Brazilian election results also sent shockwaves through the market. Luiz Inácio Lula da Silva unexpectedly defeated right-wing candidate Flávio Bolsonaro in Sunday's runoff, sending Brazil ETFs listed in Japan plunging as much as 16% intraday, while CME foreign exchange derivatives contracts implied a decline of more than 10% in the real against the dollar.

This week, tech giants including Microsoft, Alphabet and Amazon will release earnings one after another, and whether AI infrastructure investment can be sustained will be tested by the market. Meanwhile, both the Federal Reserve and the Bank of Japan will announce interest rate decisions, and global bond and currency markets are expected to see heightened volatility as a result. Nick Twidale, chief market analyst at AT Global Markets in Sydney, noted in a research report that market focus will "shift back from the geopolitical headlines that have dominated the trend for weeks to central bank policy and the direction of interest rates."

The three major U.S. stock indices opened higher across the board, with the Dow up 0.2%, the S&P 500 up 0.25%, and the Nasdaq up 0.28%.

South Korea's KOSPI closed down 1.45% at 5,469.59 points, the Nikkei 225 closed down 0.8% at 62,189.65 points, and the TOPIX bucked the trend to close up 0.2% at 3,972.98 points.

European stocks opened mixed, with the Euro Stoxx 50 up 0.07%, Germany's DAX up 0.28%, the UK's FTSE 100 down 0.17%, and France's CAC 40 up 0.60%.

The U.S. 10-year Treasury yield edged down 3 basis points to 4.97%, with Treasuries strengthening overall.

Japan's 10-year government bond yield fell 2 basis points to 2.780%.

Brent crude retreated from a six-month high, falling 1.5% to about $114.95 a barrel.

The cooling sentiment around AI-related trades was particularly evident in Asian markets. South Korea's KOSPI closed down 1.45% at 5,469.59 points, with AI concept stocks performing weakly. Goldman Sachs strategists promptly cut their KOSPI target by 25%. Chinese AI model developers also weakened, as Moonshot's release of a new model prompted the market to reassess the competitive landscape.

Japan's market was mixed. The Nikkei 225 closed down 0.8% at 62,189.65 points, with chip-related stocks the biggest drag and the worst-performing sector for the Nikkei this week; but the TOPIX bucked the trend to close up 0.2% at 3,972.98 points. Overall, the MSCI Asia index has fallen for four consecutive weeks, its longest losing streak since April this year.

Nasdaq 100 futures fell 0.2%, with the underlying spot index having posted declines for two consecutive weeks, and the U.S. semiconductor index also set its longest losing streak since November. European stocks opened relatively independently, expected to open about 0.3% higher.

Central bank decisions and earnings week pose a double test

This week's market calendar is packed. Nick Twidale, chief market analyst at AT Global Markets in Sydney, noted in a research report that market focus will "shift back from the geopolitical headlines that have dominated the trend for weeks to central bank policy and the direction of interest rates."

The policy decisions of the Federal Reserve and the Bank of Japan are in the spotlight, with both facing pressure from stubborn inflation, rising energy costs and high global bond yields. The U.S. 10-year Treasury yield edged down 3 basis points to 4.97%, with Treasuries strengthening overall.

Eugene Leow, senior rates strategist at DBS Bank in Singapore, said that "AI doubts, growth slowdown risks, and political uncertainty from European and U.S. midterm elections will keep demand for safe-haven assets elevated. At current absolute yield levels, Treasuries should serve well as a safe-haven hedge."

French bond futures strengthened markedly, outperforming German bund futures. Moody's kept France's credit rating unchanged, and combined with the absence of another large-scale outbreak of violence, market sentiment was somewhat lifted. Bloomberg strategist Mark Cranfield noted that investors will be watching whether the German-French spread can narrow after its recent sharp widening.

Oil prices retreat as Trump's Iran remarks roil markets

Global crude benchmark Brent retreated from a six-month high, falling 1.5% to about $114.95 a barrel, easing inflation pressure on the market to some extent.

In an interview with Fox News, Trump said the time "is coming to make a decision" on whether to reach a deal with Tehran or "finish it off," using tough language. Meanwhile, Iran is reportedly set to host a regional security dialogue attended by senior security and defense officials from Saudi Arabia, Pakistan and Turkey.

Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, said in an interview with Bloomberg Television that if the pace of data center construction cannot meet growing computing demand, the rapid adoption of AI itself could bring inflationary pressure, a risk that has not yet been fully priced in by the market.

Brazil election shock: real faces double-digit decline pressure

The Brazilian market is expected to come under severe selling pressure after the open this week. Lula's surprise victory caught many investors leaning toward the right-wing candidate off guard, and Bolsonaro immediately announced he would seek to have the runoff annulled.

Real foreign exchange derivatives contracts on the CME showed an exchange rate of about 5.55 per dollar, implying a decline of more than 10% from Friday's close. ETFs listed in Japan tracking Brazilian assets plunged as much as 16% intraday.

Anna Wu, founder and investment strategist at investment research firm Floodlines Research, said, "The market was completely unprepared for this result. In my view, this is not just an emotional reaction; the local market now faces real risks of government debt expansion and currency depreciation." Risk disclosure and disclaimer

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