Week Ahead: Midterms, NFP, RBA rate decision & Apple earnings

Last week was a busy one, with five central bank rate decisions, including holds from the Fed, the ECB and the BoJ, a surprise hold from the RBNZ and a hike from the BoC. Tech earnings also came through thick and fast, with numbers from the likes of Alphabet, Amazon and Intel accelerating a sell-off in the sector.

This week is shaping up to be a potentially shaky one, with the U.S. midterm elections, the nonfarm payroll report and Apple earnings all in focus amid the rumblings in the AI trade. Rate decisions are also due from the RBA and BoE.

U.S. midterm elections

The U.S. midterm elections on Tuesday will decide whether Congress shifts from unified Republican control to a divided government.

While Democrats are expected to claim the House, questions remain about whether they will succeed in the Senate.

A Democratic House and Senate could lead to more regulation of banks, crypto and tech firms. However, Trump would also retain veto power and executive authority over areas such as immigration, tariffs and foreign policy, which would limit legislative change. A Democrat win could be negative for U.S. stocks, while Treasury yields and the U.S. dollar could also come under pressure on expectations of tighter fiscal policy and slower growth.

Should Republicans retain control, this could support defence and deregulation, while reinforcing concerns over tariffs and the deficit.

A Republican win could see Treasuries and the U.S. dollar rise amid concerns that tariffs could translate into inflation and more rate hikes.

A Democrat House and a Republican Senate – or a “gridlock” may be the most market-friendly outcome. This could limit spending and regulatory changes and keep uncertainty low. Such an outcome could be positive for US stocks and weigh on the USD and Treasuries.

U.S. nonfarm payrolls

While the Fed left interest rates unchanged, in line with expectations, the messaging was less hawkish than expected, and expectations for a December hike have fallen to 75% from 84% ahead of the meeting. That comes even as core PCE showed inflation rising to 3.1% and Q3 GDP came in stronger than expected at 3.4%.

After Federal Reserve Chair Kevin Warsh signalled patience and indicated that more data and information are needed before the next move, attention will be firmly on Friday's nonfarm payroll report.

In September, the report disappointed, with job creation slowing to 29K to 133K, missing forecasts of 90K. However, the composite PMI employment subcomponent rose at its second-fastest pace since 2022. This, combined with lower initial jobless claims, points to risks skewed to the upside.

Ahead of Friday's report, we have ISM manufacturing PMI on Monday, ISM services on Wednesday, as well as the ADP payroll report on Wednesday, which could provide further insights.

Strong jobs data could spark another leg lower in Gold which trades at 2026 lows.

RBA rate decision

The RBA is expected to raise rates by 25 basis points after lifting rates by 25 basis points at its meeting on September 29. This would take rates to 4.85%, with an 85% probability of a hike priced in.

The latest inflation data showed headline inflation accelerated to 4.3% year-on-year from 4% in August. The trimmed mean rate also ticked higher to 3.6%, with both rates well above the upper band of the RBA's target range of 2% to 3%.

There is only a 50% probability that the RBA will hike again in 2027. Therefore, a hawkish hike would be needed to convince the market that there could be more rate increases over the coming year and to lift AUD/USD towards 0.71.

Other events on the macro calendar include the BoE rate decision and Eurozone inflation.

Apple earnings

Apple will report earnings on Monday after the market close. So far, Apple has weathered the tech sell-off, with the share price rising to record highs. But the question will be whether earnings can justify its lofty valuation.

Expectations are for EPS of $1.98 on revenue of $113.4 billion, marking a 10% year-over-year gain in revenue. iPhone revenue is expected to come in at $56.5 billion, accounting for around half of total sales. Services revenue is expected to be $31.6 billion, helping margins, with gross margins projected at around 48%.

The services business remains very much the margin driver. Guidance that holds and margins above 47% would likely reassure investors that this rally is supported fundamentally.