Week Ahead: How will midterms, NFP, the RBA rate decision and Apple earnings shape markets?

A deepening tech sell-off marked a busy week as results from companies including Alphabet, Amazon and Intel added to the sector's losses. Alongside the wave of tech earnings, five central banks delivered rate decisions: the Fed, the ECB and the BoJ kept rates unchanged, the RBNZ unexpectedly held steady, and the BoC raised rates.

Markets face a potentially unsettled week as concerns surrounding the AI trade persist. The U.S. midterm elections, nonfarm payroll report and Apple earnings will be key areas of focus, alongside rate decisions from the RBA and BoE.

What Could the U.S. midterm elections Mean for Markets?

Whether Republicans retain unified control of Congress or the U.S. moves towards divided government will be determined by Tuesday's U.S. midterm elections.

Democrats are expected to take the House, but their prospects of winning the Senate remain uncertain.

Control of both the House and Senate would give Democrats scope to pursue greater regulation of banks, crypto and technology companies. Legislative changes would nevertheless be constrained by Trump's veto power and his continued executive authority over immigration, tariffs and foreign policy. U.S. stocks could react negatively to a Democratic victory. Expectations of tighter fiscal policy and weaker growth could also put pressure on Treasury yields and the U.S. dollar.

Continued Republican control could favour defence and deregulation, although it could also deepen concerns about tariffs and the deficit.

Concerns that tariffs could feed inflation and prompt further rate hikes could lift Treasuries and the U.S. dollar following a Republican victory.

Markets may favour a Democratic House alongside a Republican Senate, or “gridlock”. By restricting spending and regulatory changes, this configuration could keep uncertainty low. US stocks could benefit, while the USD and Treasuries could come under pressure.

Could U.S. nonfarm payrolls Reshape Rate Expectations?

Expectations of a December rate hike have eased to 75%, compared with 84% before the Fed meeting. Although the decision to leave rates unchanged was anticipated, the Fed's communication was less hawkish than markets had expected. That shift came despite core PCE showing inflation climbing to 3.1% and Q3 GDP exceeding expectations at 3.4%.

Friday's nonfarm payroll report will draw close scrutiny after Federal Reserve Chair Kevin Warsh called for patience, signalling that further data and information are required before the next policy move.

September's report fell short of expectations, with job creation slowing to 29K to 133K against a forecast of 90K. By contrast, the employment subcomponent of the composite PMI increased at its second-fastest pace since 2022. Together with a decline in initial jobless claims, this suggests that risks are tilted to the upside.

Before Friday's release, further indications could come from Monday's ISM manufacturing PMI, followed on Wednesday by ISM services and the ADP payroll report.

With Gold trading at 2026 lows, a strong employment reading could trigger a further decline.

Will the RBA rate decision Signal Further Tightening?

Markets have priced in an 85% probability of an RBA rate hike. The central bank is expected to increase rates by 25 basis points to 4.85%, following its 25 basis points increase at the September 29 meeting.

Headline inflation picked up to 4.3% year-on-year in the latest release, compared with 4% in August, while the trimmed mean measure edged up to 3.6%. Both measures remain well above the upper limit of the RBA's 2% to 3% target range.

With only a 50% probability attached to another RBA hike in 2027, a hawkish rate increase would be required to persuade markets that further tightening could follow over the coming year. Such a signal would also be needed to push AUD/USD towards 0.71.

Elsewhere on the macroeconomic calendar, attention will turn to the BoE rate decision and Eurozone inflation.

Can Apple earnings Support Its Valuation?

Record highs in Apple's share price suggest it has so far withstood the technology-sector sell-off. Its earnings release, due after the market close on Monday, will test whether the results can support that elevated valuation.

Revenue is forecast at $113.4 billion, representing 10% year-over-year growth, with EPS expected at $1.98. Around half of total sales is expected to come from iPhone revenue of $56.5 billion. Forecast services revenue of $31.6 billion should support margins, with gross margins estimated at around 48%.

Services continue to be the main driver of margins. If guidance holds and margins exceed 47%, investors would likely take reassurance that fundamentals underpin the share-price rally.