One Eye On December: Major Central Banks Keep Rate Hikes On The Table, Key US Midterm Elections Arrive Lunaro Weekly Report

(MENAFN- Mid-East Info) Nick Spencer-Skeen, Senior Executive Officer, Lunaro Markets Limited

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Friday Closing Prices (30 October 2026)

S&P 500 7,580 (-1.82%)

Nasdaq 25,437 (-2.86%)

Gold $3,875 (-3.61%)

Brent Crude Oil $112.27 (+0.71%)

Central banks dominated the macro calendar this week, with the Federal Reserve (Fed), European Central Bank (ECB), and Bank of Japan (BoJ) all leaving interest rates unchanged while keeping the prospect of further tightening in December firmly on the table^1,2,3.

The Fed maintained its hawkish stance, with officials signalling that further hikes may be necessary to contain inflation¹. The ECB held its deposit rate at 2.5%, although President Lagarde's unexpected early departure added uncertainty to the policy outlook². In Japan, the BoJ held rates at 1.25%, with Governor Ueda signalling that underlying inflation had reached its 2% target, strengthening the case for a December hike³.

Economic data offered little reassurance. China's manufacturing PMI slipped back into contraction at 49.3, while France's economy unexpectedly shrank 0.1% in Q3, compounding existing fiscal and political pressures⁴. Canadian growth also disappointed, reinforcing concerns over slowing activity⁴.

Equity markets faced renewed selling pressure toward the end of the week, led by the AI complex. The S&P 500 fell 1.3% on the week, with the tech-heavy Nasdaq down 3% and eyeing correction territory⁵.

The AI Hangover

Tech earnings were one of the catalysts that drove the selling pressure mentioned above, with disappointing results from Alphabet, Amazon, and Intel^6,7,8.

Alphabet was the standout disappointment, plunging 13% and erasing roughly $500bn in market capitalisation on Thursday⁵. Despite revenue growing 25% to $127.6bn, search advertising missed expectations, while quarterly capex reached $51.3bn and free cash flow turned negative⁶. It was only the second quarter ever of negative cash flow since the company went public back in 2004.

Amazon also disappointed, reporting capital expenditure nearly $20bn above forecasts alongside weaker-than-expected fourth-quarter revenue guidance⁷. Intel compounded the selling, plunging 29% on Friday after issuing disappointing guidance⁸. Microsoft offered some relief, with cloud revenue growing nearly 50% and free cash flow reaching $18.6bn⁹.

The common theme that ran through these reactions was that investors are no longer satisfied with accelerating AI demand alone. With spending commitments climbing and financing costs elevated, cash generation and returns on invested capital appear to be becoming the defining metrics for valuations.

US Midterm Elections Arrive

The US midterm election takes place on Tuesday, with all 435 House seats and 35 Senate seats contested¹⁰. Polls begin closing at 6 pm ET, with the bulk of results expected overnight into Wednesday, although close races could delay confirmation of congressional control¹⁰.

Polls broadly expect Democrats to capture at least one chamber¹¹, establishing a divided government and limiting the administration's legislative flexibility. Such an outcome could constrain the administration's fiscal expansion plans and reduce the likelihood of further tax changes.

For markets, the outcome could be taken in a variety of different ways. For example, a divided Congress could be welcomed by bond markets if it restrains additional deficit spending. Yet equity markets could take a result badly if the result brings with it the likelihood of more AI regulation. Slower cryptocurrency legislation could also weigh on sentiment.

With divided government largely anticipated, the greatest market reaction would likely come from an unexpected Republican sweep or a decisive Democratic victory across both chambers.

Notable Week Ahead Earnings

Corporate earnings remain a key focus next week, particularly following the sharp selloff across the AI complex and renewed scrutiny over the returns on enormous capital expenditure commitments¹².

Apple and Palantir report on Monday, followed by AMD, Arista Networks, and Super Micro Computer on Tuesday¹². These releases will offer important insight into AI infrastructure demand and whether spending continues to translate into sustainable revenue growth.

Wednesday brings a real mix of sectors into play, ranging from semiconductor demand from Qualcomm right through to consumer spending via McDonald's. Shopify, Pfizer, and Amgen are also scheduled to report during the week¹².

For markets, the bar arguably remains particularly high for tech companies. Strong revenue growth alone may no longer satisfy investors increasingly concerned about margins and cash generation. With sentiment already fragile, disappointing guidance could extend the recent tech selloff, while reassuring results may provide some relief to an increasingly sceptical market.

Sources: Review: ECB Stays Put But December Hike Likely VIEW Analysts react to BOJ decision to keep rates steady | Reuters Bloomberg Economic Calendar W/C 26th Oct Bloomberg Terminal Price Quote (SPX, NQ, GOOG, INTC) com Announces Third Quarter Results Wall Street closes sharply lower as AI cash burn fears spark tech selloff | Reuters Midterms 2026: Congress Polls and More Earnings Reports | Nasdaq

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