Dow Jones futures gain ground as risk appetite recovers before a busy week

• Peace talks between Qatari and Iranian officials bolster sentiment, sending US index futures higher.
• Major company results, key economic releases including NFP, and comments from a US Fed official are in focus for traders.
• The probability of a December Fed rate rise reaches roughly 71% as robust economic figures and sticky inflation underpin expectations.

A 0.25% rise puts Dow Jones futures at around 52,050 in Monday’s European trading. S&P 500 futures are up 0.37% at around 7,640, while Nasdaq 100 futures have climbed over 70% to near 28,750.

Diplomatic efforts to resolve the Middle East conflict supported risk appetite and lifted US stock futures, although concerns persisted over renewed US military action against Iran. For a third consecutive day, Qatari and Iranian officials held talks, seeking an agreement to bring the war to an end before the forthcoming US midterm elections.

A busy week of major company results, economic releases and political events lies ahead for investors. Among the closely watched quarterly earnings reports are those from Apple, Palantir, AMD, Pfizer and McDonald’s.

Beyond company results, the US Nonfarm Payrolls (NFP) report and ISM manufacturing and services figures are among the major macroeconomic releases awaiting traders. Several Federal Reserve officials are also due to speak during the week, with their comments expected to shed further light on the central bank’s monetary policy path.

Growing expectations that the Federal Reserve could raise interest rates may temper traders’ appetite for risk following the initial improvement in sentiment. The CME FedWatch Tool puts the probability priced in for a December increase at roughly 71%. Recent US macroeconomic releases, pointing to a resilient economy and persistent inflation, have reinforced those expectations.

The gains this week follow losses across the main US stock indices in the previous week. A 2% fall in the technology-heavy Nasdaq Composite led the retreat; the Dow Jones Industrial Average lost 0.85%, while the S&P 500 declined 0.57%. Towards the end of the week, disappointing technology earnings fuelled wider concerns over the sustainability of the AI trade, intensifying selling pressure.

US midterms draw market attention as Polymarket odds favour Democrat control

With the US mid-term elections approaching, MUFG/BTMU analysts say market attention “will also be focused on the outcome from the US mid-term elections at the start of this week.” Pointing to the latest Polymarket odds, they say these “highlight that there are high expectations that the Republicans will lose control of Congress, and the Democrats could even take both the House and Senate,” with traders increasingly incorporating this political backdrop into their strategies.