Week Ahead: Midterms, NFP, the RBA rate decision and Apple earnings set the agenda

Five central bank decisions dominated last week's policy calendar: the Fed, the ECB and the BoJ left rates unchanged, the RBNZ surprised markets by holding, and the BoC opted for an increase. A heavy flow of technology earnings, including results from Alphabet, Amazon and Intel, compounded the sector's sell-off.

The U.S. midterm elections, nonfarm payroll report and Apple's results headline this week's agenda, alongside policy decisions from the RBA and BoE. With unease over the AI trade continuing, markets could face a volatile week.

U.S. midterm elections Put Congressional Control in Focus

Tuesday's vote in the U.S. midterm elections will determine whether unified Republican control of Congress continues or gives way to divided government.

The House is expected to fall to the Democrats; a Senate victory for the party is less certain.

Banks, crypto and technology firms could face tighter regulation if Democrats secure both chambers. The scope for legislative change would, however, remain limited by Trump's veto and executive powers over immigration, tariffs and foreign policy. For U.S. stocks, a Democratic win could prove unfavourable. Treasury yields and the U.S. dollar could also weaken if investors anticipate tighter fiscal policy and slower growth.

Defence and deregulation could receive support if Republicans keep control, but concerns about tariffs and the deficit could become more pronounced.

Tariff-related fears of higher inflation and additional rate increases could, in turn, push Treasuries and the U.S. dollar higher in the event of a Republican win.

For markets, the most favourable result may be a Democratic House and Republican Senate, producing “gridlock”. Limits on spending and regulatory changes could help contain uncertainty. US stocks could gain from this outcome, whereas the USD and Treasuries could weaken.

U.S. nonfarm payrolls Take Centre Stage as Rate Expectations Ease

Core PCE put inflation at 3.1%, while Q3 GDP beat expectations at 3.4%. Despite those readings, the Fed's message proved less hawkish than anticipated when it delivered the expected decision to hold interest rates. The probability of a December increase has consequently dropped from 84% before the meeting to 75%.

Friday's nonfarm payroll report now takes on particular importance. Federal Reserve Chair Kevin Warsh has urged patience, indicating that the next policy move requires more data and information.

September's disappointing report showed job creation slowing to 29K to 133K, below the 90K forecast. A different signal came from the composite PMI's employment subcomponent, which recorded its second-fastest increase since 2022. Alongside fewer initial jobless claims, that reading suggests upside risks.

Further clues may emerge before Friday: Monday brings the ISM manufacturing PMI, with ISM services and the ADP payroll report both scheduled for Wednesday.

Already trading at 2026 lows, Gold could extend its decline if the jobs figures prove strong.

RBA rate decision Expected to Bring Another Increase

An increase of 25 basis points to 4.85% is expected from the RBA, following the 25 basis points rise delivered at its September 29 meeting. Market pricing assigns an 85% probability to a hike.

Headline inflation reached 4.3% year-on-year in the latest figures, up from 4% in August. An accompanying rise took trimmed mean inflation to 3.6%. Both readings sit well above the top of the RBA's 2% to 3% target range.

Market pricing puts the probability of a further RBA increase in 2027 at just 50%. To convince investors that additional rises could follow over the coming year, and to lift AUD/USD towards 0.71, the bank would therefore need to accompany a hike with a hawkish message.

Eurozone inflation and the BoE rate decision also feature on the macroeconomic calendar.

Apple earnings Put Record Share Prices to the Test

Monday's earnings announcement, scheduled after the market close, will put Apple's high valuation under scrutiny. The company has so far ridden out the technology sell-off, its shares reaching record highs; the results must now show whether that valuation is justified.

Forecast revenue of $113.4 billion would represent a 10% year-on-year increase, alongside expected EPS of $1.98. iPhone sales are projected to contribute $56.5 billion, or roughly half the total. With services revenue forecast at $31.6 billion providing support, gross margins are expected to be around 48%.

Margins remain driven primarily by the services business. Investors would likely be reassured that fundamentals support the rally if guidance is maintained and margins stay above 47%.