Five things to watch in markets in the week ahead

Investing.com - A potential cooling in a trade fight between the United States and China is expected to be front of mind for markets this week, with much of the focus on talk of high-level meetings taking place before the end of the month. Meanwhile, a crush of corporate earnings will be closely monitored, as well as the release of a gauge of U.S. inflation -- nine days after it was originally supposed to be published.

1. U.S.-China trade tensions

Trade will remain fixed in the spotlight, as investors assess indications of easing U.S.-China tariff tensions.

Treasury Secretary Scott Bessent has said he expects to meet with Chinese Vice Premier He Lifeng this week in a bid to prevent an escalation of the levies. Chinese state news sources have noted that He and Bessent have held "constructive discussions" and agreed to conduct fresh trade discussions as soon as possible.

Last week, President Donald Trump suggested that his proposed triple-digit tariffs on China were not sustainable, even as he hit out at Beijing for recently ratcheting up for its decision to tighten controls over crucial rare earth exports.

Trump also confirmed that a meeting later this month with Chinese counterpart Xi Jinping in South Korea will go ahead, adding in a television interview that the U.S. is "going to be fine with China."

Still, tariff threats seem to remain a key policy tool for the White House. Trump has vowed to keep "massive" tariffs on India in place until it stops importing Russian oil and flagged that he will increase duties on Colombia over a prolonged drug trade feud.

Trade ructions, coupled with the emergence of fresh concerns over the credit health of regional U.S. lenders, have fueled an uptick in market volatility. The so-called VIX "fear gauge" jumped to its highest level in almost half a year on Friday.

2. Tesla, Netflix among key earnings this week

The pace of the quarterly earnings season is set to accelerate in the coming days, after a host of Wall Street lenders signaled a strong start to the latest reporting period.

Among the names highlighting this week’s docket of results are streaming giant Netflix and electric carmaker Tesla.

Shares of Netflix, which is due to report after the closing bell on Tuesday, have climbed by more than 35% so far this year, reflecting mostly bullish sentiment around a company that has moved to enhance its status as one of the icon’s of the streaming industry by introducing advertising to its platform. But observers may be curious to hear how the business has been impacted by calls from tech mogul Elon Musk for users to cancel their subscriptions over a controversy surrounding an animated show and its creator.

Musk’s Tesla, meanwhile, has notched record third-quarter deliveries, although worries have swirled around the expiration of a U.S. tax credit for electric vehicles.

However, as analysts at Vital Knowledge said, "earnings reports for this company are nearly irrelevant as the bulk of the narrative and equity value isn’t related to the core business of manufacturing and selling autos but instead hope and hype for products that won’t impact income statement in a material way for years to come." Musk and Tesla have long touted the benefits of initiatives like robotaxis and full self-driving technology.

3. Intel to report

Intel may also come under some scrutiny when it reports after the bell on Thursday.

The embattled chipmaker’s stock price has ramped up in recent weeks following a slate of capital injections, including from artificial intelligence-darling Nvidia and Japanese investment titan SoftBank. Trump announced in August that the U.S. would take a 10% stake in the business as well, even after the president said Intel CEO Lip-Bu Tan should step down because of conflicts of interest.

Despite Tan’s efforts to find partners to support a revival in Intel’s fortunes, the near-term prospects are murky. Intel has long struggled to keep up in the AI arms race, trailing peers like Nvidia and Advanced Micro Devices, while its contract chip manufacturing business -- a target of heavy investment -- has labored behind global leader TSMC.

Intel is tipped to post roughly break-even income in the third quarter, with weakness at its data center and AI division seen contributing to a 1.2% decline in group-wide sales to $13.12 billion, the Vital Knowledge analysts said.

4. Delayed U.S. inflation data

All of these corporate returns could offer insight into the state of the American economy during a time when official data has been largely postponed because of a prolonged federal government shutdown.

Yet the economic calendar is anticipated to once again come back into focus this week, after the government said it would release its consumer price index for September on Friday.

A tracker of inflation in the world’s largest economy, the CPI will arrive mere days before the Federal Reserve is scheduled to have its upcoming monetary policy gathering. Last month, the Fed slashed interest rates by 25 basis points in a bid to support fading employment despite looming risks from sticky price gains.

Although the central bank will receive new data on the inflation part of this equation, the weeks-long shutdown has left policymakers without a slate of other indicators they typically use when calibrating rates, including a monthly measure of nonfarm payrolls.

5. Parliamentary vote in Japan

In Japan, a parliamentary vote on Sanae Takaichi’s premiership is expected to take place on Tuesday, with the LDP leader set to become Japan’s first female prime minister.

Japan’s ruling Liberal Democratic Party had secured enough backing from its allies to form a coalition government helmed by Takaichi, according to local media reports.

Widely viewed as a fiscal dove, Takaichi is broadly expected to increase government spending and oppose more interest rate hikes by the Bank of Japan. Her election as the leader of the LDP recently sparked a rally in Japanese markets, on bets of more accommodative conditions under her leadership.

On Monday, Japan’s Nikkei 225 index surged nearly 3.47% to surpass 49,000 points, while the TOPIX jumped over 2.46% and hovered around record highs.