GLOBAL MARKETS-Stocks rise and oil slips on Middle East diplomacy efforts ahead of Big Tech earnings

Global stocks rose and oil prices slipped on Tuesday as investors weighed efforts to end the Middle East conflict ahead of US Big Tech earnings, seen as a key test of AI trade, and central bank meetings that could shape the near-term outlook for interest rates. Iran's supreme leader ‌met with the country's security chief and discussed the importance of pursuing Iran's interests and implementing its conditions with the aim of ending the war, and the "no war, nor peace situation", state media reported.

Diplomatic efforts were also under way, with representatives from Saudi Arabia, Turkey and Pakistan in Tehran. Brent crude prices reversed earlier gains and were down 1% at $114.74 a barrel while Europe's STOXX 600 index edged up 0.1% and S&P 500 and ‌Nasdaq futures were up 0.2% and 0.3% respectively.

In Europe, banks were in the spotlight as the continent's largest lender, HSBC, fell 6.7% after missing revenue expectations for the July-September quarter owing to slower growth at ‌its wealth business. Its pretax profit was in line with estimates. "Banks have been the winners of the latest quarter before this one, reporting record results because of high volatility and because of AI financing," said Ipek Ozkardeskaya, a senior market analyst at Swissquote Bank.

"But right now, they are coming under pressure because we do see short-term yields rising more than long term; that's basically eating into the income revenue," she said, adding that banks are in a better position than sectors that are more vulnerable to ⁠rising costs. Quarterly earnings ​are the central focus globally as investors weigh up ⁠the impact of the conflict in Iran, including higher costs and interest rates, on corporate performance.

EARNINGS DELUGE In the US this week, more than a third of S&P 500 companies are expected to report, and results on Tuesday pointed to a mixed bag.

Companies ⁠such as Coca-Cola and economic bellwether United Parcel Service raised forecasts while reports from Hilton and JetBlue reflected rising costs resulting from the Middle East conflict. The spotlight later in the week will be on AI hyperscalers including Microsoft, Amazon and ​Alphabet as investors seek signs that these companies' billion-dollar investments are yielding returns as expected.

Microsoft shares slipped 0.8% in premarket trading while Amazon and Alphabet registered marginal gains. "We remain medium-term bullish on ⁠the 'picks and shovels' trade. We see capex cycle remaining strong and the earnings remaining robust," said Jefferies economist Mohit Kumar.

"However, we do admit that, as with any cycle, there would be winners and losers in the AI trade and a number of companies will ⁠not ​remain profitable and even go bust." Big Tech earnings could determine appetite for the eagerly awaited public debut of AI bellwether Anthropic and Meta Platforms' $95 billion equity fundraising.

CENTRAL BANKS EXPECTED TO STAY ON HOLD Policy decisions from the Federal Reserve, European Central Bank and Bank of Japan are due this week, with economists expecting all three to stand pat on interest rates, leaving the focus on comments from policymakers to ⁠gauge the rates outlook.

Fed policymakers have telegraphed that they will not raise short-term borrowing costs again on Wednesday, but with inflation concerns still front and centre, investors believe a rpause in rate hikes will ⁠not last for long. Traders are pricing in an increase ⁠from the Fed in December. The euro eased 0.2% and at $1.114 it was near the May low it hit two weeks ago.

The yield on the US 10-year Treasury note was steady at 4.974%, staying below 5%, which it breached in September as investors scurried to Treasuries for safety during stock market tumult ‌over AI worries. Spot gold eased by ‌0.1% to $4,010.96 an ounce.