A look at the day ahead in U.S. and global markets from Mike

Dolan

Markets struggling which way to look will be dizzy again in an

event-strewn Wednesday but the spotlight first thing drops on

Alphabet's impressive earnings beat and a relief-rally

in election-bruised U.S. Treasuries.

A critical fortnight for investors includes next week's U.S.

election and Federal Reserve meeting, GDP updates later on

Wednesday, the October employment report on Friday, a Bank of

Japan policy meeting and pivotal first budget from Britain's new

government.

With a torrent of top corporate earnings reports streaming

in to boot, the overnight focus was on Google-parent Alphabet's

update - the second of the so-called Magnificent Seven of U.S.

megacaps to report so far. Microsoft and Meta are due out later.

Alphabet stock was up about 2% ahead of the bell after the

beat with the firm saying its artificial intelligence spend was

"paying off" alongside a 35% surge in its cloud business and an

election-related jump in YouTube ad sales.

Even though all the megacaps were higher overnight in

sympathy, Alphabet's stock rise was tempered from an initial 5%

gain - due in part to more mixed earnings news elsewhere.

Advanced Micro Devices ( AMD ), for example, skidded 7% after it

forecast revenue just shy of estimates, even as it upped its AI

chip sales forecast to $5 billion for 2025.

AI-watchers also homed in on news that OpenAI is working

with Broadcom ( AVGO ) and TSMC to build its first

in-house chip designed to support its AI systems.

With the tech-heavy Nasdaq outperforming on Tuesday

to clock its first record close since July, U.S. stock index

futures more broadly were slightly higher ahead of Wednesday's

open.

Helping the mood was a retreat in restive U.S. Treasury

yields, as news of a softening of U.S. job openings

last month was twinned with strong demand for a $44 billion sale

of 7-year notes. Those sold at a high yield of 4.215%, almost 2

basis points below where they traded before the auction, and the

take-up was above average at 2.74 times the debt on offer.

Even though U.S. consumer confidence readings for October

were better than forecast, the 10-year benchmark yield has

recoiled more than 10 bp from Tuesday's peak to hover about

4.22% first thing.

U.S. GDP updates and private sector jobs numbers top the

slate on Wednesday - with brisk 3.0% growth expected to be

confirmed for the third quarter alongside headline inflation

readings near the Federal Reserve's target.

EUROPEAN ECONOMY

Overseas, there was better news than expected in Europe -

with Germany defying forecasts of a contraction in Q3 and

advancing 0.2% instead, while Spain's equivalent readout also

surprised to the upside and jumped an annual 3.4%.

France did better too, but Italy stalled over the quarter.

And yet dark clouds over the European economy were hard to

shift as the European Union on Tuesday decided to increase

tariffs on Chinese-built electric vehicles to as much as 45.3%

at the end of its highest profile investigation that has divided

Europe and prompted retaliation from Beijing.

The prospect of an EU/China trade war was compounded by U.S.

election risks as Republican candidate Donald Trump insisted the

EU would have to "pay a big price" for not buying enough

American exports if he won the Nov. 5 election.

Also facing a barrage of earnings updates in the region,

European stocks fell almost 1% - with Volkswagen

underscoring auto sector anxieties by reporting a

42% drop in third-quarter profit that is prompting plant

closures and threats of a workers strike.

And yet the combination of softer U.S. yields and the German

GDP beat saw the euro regain some ground against the

dollar, whose broader index slipped back.

Post-election U.S. tariff fears dragged on Chinese stocks

too, with both mainland and Hong Kong indexes

down 1% or more.

A top Chinese leadership meeting next week could reveal

stimulus details and Reuters has reported it is considering the

sale of over 10 trillion yuan ($1.4 trillion) in extra debt in

the next few years to revive its economy - possibly more

depending on the outcome of the U.S. election where Trump has

pledged 60% tariffs on all Chinese imports.

The offshore yuan bounced back from Tuesday's 2-month

low against the softer dollar.

Elsewhere, sterling was steady to firmer and UK gilt

yields calmer ahead of the other big event of the

day - budget plans from British finance minister Rachel Reeves.

Reeves' tax rises and investment spending plans are expected

to push UK government bond issuance towards 300 billion pounds

($389 billion) this fiscal year, a roughly 6% increase on the

existing target, according to a Reuters poll of bond dealers.

Ahead of the widely telegraphed set piece, Reeves said on

Tuesday Britain's minimum wage for most adults would increase by

6.7% from April next year, above prior independent estimates of

a 3.9% rise.

Britain's blue-chip FTSE stock index was slightly in

the red ahead of the budget, hampered by a 3.5% drop in pharma

giant GSK after it warned that its vaccine sales would

fall this year.

Other big earnings reports included a UBS beat that

sent the stock of the Swiss banking behemoth up 1%.

Key developments that should provide more direction to U.S.

markets later on Wednesday:

* US Q3 GDP and related inflation measures, October ADP private

sector payrolls, September pending home sales

* US corporate earnings: Microsoft, Meta Platforms, Eli Lilly,

Amgen, AbbVie, BioGen, Metlife, Prudential Financial,

Caterpillar, Kraft Heinz, Paycom Software, Global Payments,

Automatic Data Processing, Gen Digital, Cognizant Technology,

Verisk, Clorox, Ventas, GE Healthcare, Equinix, Allstate, Hess,

Garmin, Booking, MGM Resorts, Otis, Illinois Tool Works etc

* British finance minister Rachel Reeves presents first budget

of new Labour Party government

* European Central Bank board member Isabel Schnabel speaks;

Bank of Canada Governor Tiff Macklem speaks

(Writing by Mike Dolan,

[email protected];

Editing by Alison Williams)