European stocks and U.S. equity index futures edged higher after a turbulent session in Asian markets. A pullback in oil prices improved market sentiment, as investors await key U.S. inflation data due this week and the corporate earnings season set to kick off.

As of press time, Dow futures were up 0.15%, S&P 500 futures gained 0.08% — the index closed last week just shy of a record high — while Nasdaq futures fell 0.13%.

Falling crude prices lifted sentiment in Europe. The pan-European Stoxx 600 rose 0.6%, supported by strength in auto stocks.

Earnings season on the horizon

Trading activity was relatively light, with Japanese markets closed for a holiday and the U.S. Treasury market shut for Columbus Day.

Investors are awaiting the upcoming earnings season. Major banks including JPMorgan Chase and Citigroup will unofficially kick things off on Tuesday, with Bank of America reporting on Wednesday. Wall Street's largest banks are expected to post combined third-quarter equity trading revenue of as much as $19 billion.

Later in the week, key artificial intelligence players will also take the spotlight, including Europe's ASML and Taiwan Semiconductor Manufacturing, both of which will report results.

Bloomberg strategist David Savage said in a macro market analysis: "With the financial sector leading off the third-quarter earnings season, U.S. equities could hit fresh highs this week. Rising rates are raising the bar that stocks need to clear to move higher, and most stocks have yet to meet that bar. Still, strong results from technology companies are expected to sustain upward momentum in the major indexes."

According to LSEG IBES data, S&P 500 constituents are expected to post year-over-year earnings growth of more than 30% in the third quarter, with most of that growth coming from the technology sector. Earnings for Stoxx Europe 600 constituents are expected to rise 21%, or 9.7% excluding the energy sector.

Strategists at Goldman Sachs, including Christian Mueller-Glissmann, said that given the strong corporate earnings growth outlook and the recent pullback in equity valuations, the team has raised its three-month equity allocation recommendation to overweight.

Vincent Juvyns, chief investment strategist at ING in Brussels, said: "So far, double-digit corporate earnings growth has helped offset the negative impact of rising rates. The upcoming earnings season will be an important gauge of whether this bull market has further room to run."

U.S. bond market closed

U.S. Treasury futures edged lower, with the cash Treasury market closed for the Columbus Day holiday. This month, U.S. Treasury yields rose to their highest level in 24 years. Persistently high energy costs have intensified concerns about sticky inflation, potentially prompting central banks to maintain a hawkish stance and weighing on equity valuations.

In France, a political deadlock over fiscal policy has sparked fresh concerns, pushing French government bond yields higher again. The euro-area benchmark German bund yield edged lower, while risk premiums on French and Italian debt narrowed slightly.

Oil price outlook clouded by uncertainty

Brent crude prices fluctuated between gains and losses amid concerns over continued attacks by Yemen's Houthi rebels on neighboring Saudi Arabia. Meanwhile, traders were also assessing U.S. President Trump's claim that Russia and Ukraine have reached an "energy ceasefire agreement."

Deutsche Bank strategist Jim Reid said the oil price outlook remains highly uncertain. He said: "Even if the Russia-Ukraine ceasefire agreement and the easing of restrictions on Russian diesel exports can alleviate supply pressure in the refined products market, the attack on Riyadh, conflicts around the Bab el-Mandeb Strait, and continued disruptions in the Strait of Hormuz still mean oil prices and shipping costs face tail risks of further increases."

After oil prices held at elevated levels for several weeks and global bond yields climbed to multi-decade highs, traders are pinning hopes on corporate earnings to provide fresh upward momentum for stocks. At the same time, U.S. inflation data and an upcoming speech by Federal Reserve Chairman Kevin Warsh will also provide clues on the future path of interest rates. Money markets currently expect the Fed to hike rates again before December.

U.S. CPI may accelerate

U.S. consumer price index (CPI) is expected to accelerate on the back of higher gasoline prices. According to the median forecast in a survey, U.S. September CPI is expected to rise 0.6% month-over-month, up from 0.4% in August. If that forecast materializes, it would mark the largest monthly gain in five months. Core CPI, which excludes energy and food prices, is expected to rise 0.2% month-over-month, a slowdown from August.

Bruce Kasman, head of global economic research at JPMorgan Chase, said: "Oil prices remain above our previous assumptions, as shipping costs have surged significantly and refined product prices have risen even more." He said: "Current inflation signals suggest headline inflation could rebound sharply, squeezing consumer purchasing power, while core inflation could also strengthen further, keeping central banks focused on near-term rate hikes."

Market pricing currently shows only an 18% probability of a Fed rate hike this month, but the odds of a December hike have risen to 85%. Investors are also betting that the EU, Japan, and the UK will raise rates further before the end of the year.

Jim Reid, head of global macro research at Deutsche Bank, noted: "Energy prices are driving headline inflation higher, but underlying core inflation has slowed — this divergence will clearly have an important impact on the Fed's policy judgment. This is especially true given the Fed's recent signal that further monetary tightening may still be necessary, but is not urgent."

Euro keeps falling, gold struggles to hold above $4,200

In currency markets, the euro remained under pressure, trading around $1.1205. The euro had already fallen for five consecutive weeks amid concerns over fiscal deficits across European governments. The dollar index held near a 17-month high of 102.21. However, the dollar's advance against the yen stalled around 158.44, as the risk of Japanese government intervention in the currency market kept speculative traders cautious.

Bitcoin largely held its gains after three consecutive sessions of rebounds, while cryptocurrency-related stocks led early U.S. trading.

In commodities, non-yielding gold rose 0.1% to $4,198, still struggling to establish a foothold above $4,200. Gold had rebounded more than 1% last week.

Global bond selloff "hikes rates for central banks": yields hit highest since 2000

Rate hike expectations across eight major economies tumbled by nearly 200 basis points. Global bond markets are pushing up borrowing costs on their own, taking on part of the tightening task for central banks, which could reduce the number of benchmark rate hikes needed to suppress inflation. After weeks of selling, bond yields have surged to multi-year highs. Even if policymakers take no further action, financial conditions have tightened significantly, creating an economic drag — precisely the effect central banks hoped to achieve by raising policy rates. Compiled data shows traders have subsequently lowered rate hike expectations; since mid-September, the cumulative rate hike priced into interest rate swap contracts across eight major economies has fallen by nearly 200 basis points.

"Big Short" Burry shifts to put options on Nasdaq and semiconductor ETF, warns of peak within 9 months

Michael Burry, the investor who predicted the 2008 financial crisis by accurately identifying major flaws in the U.S. subprime mortgage market, has concentrated most of his bearish bets into put options on the Nasdaq 100 Index (NDX) and the VanEck Semiconductor ETF (SMH), expecting the market may peak within the next nine months. In his latest Substack post published last Sunday, Burry said he has converted most of his previous short positions into options, with put options on the Nasdaq 100 and VanEck Semiconductor ETF now accounting for nearly all of his short exposure. He said: "I think we are within 0 to 9 months of a major top." He added that as major indexes break to new highs, the final months of the bull market could be highly volatile.

Stocks in focus

Bank of America upgraded Salesforce directly by two notches from "underperform" to "buy," sending shares up 4%. The bank believes artificial intelligence will not disrupt the software company but will instead deepen the market's reliance on its products.

Truist upgraded First Solar from "hold" to "buy," sending shares up 2.4%. The firm is bullish on solar market growth and robust demand in the coming years, as well as First Solar's pricing power within the industry.

JPMorgan Chase analysts upgraded biotechnology company Biogen, sending shares up 2%. The institution said results from multiple clinical trials in 2027 will serve as catalysts for Biogen's stock price.

Australian company Iren, which operates all-renewable-energy computing facilities, has quietly signed a multi-year cloud computing agreement with Anthropic. Following the news, Iren shares surged 5.3% on Monday.

Morgan Stanley upgraded education loan servicer SLM from "equal weight" to "overweight," sending shares up 2%. The bank said the stock has fallen 15% year-to-date and current valuations are attractive, presenting a buying opportunity.

Seaport analysts upgraded Mattel from "neutral" to "buy," sending shares up more than 1%. The research firm wrote that there are market rumors the company could be acquired, and "we believe investors are re-examining the toy sector and discovering undervalued assets within it."

Quantum computing company IonQ will acquire cybersecurity firm Elisity for up to $1.3 billion, sending its shares down more than 2% after the announcement.

Shares of Micron Technology fell 2% after China's ChangXin Memory Technologies (CXMT) announced it will mass-produce a new generation of memory chips, competing for market share with U.S. and South Korean companies.