Morning Bid: Fragile calm after AI whiplash

A look at the day ahead in European and global markets from Jiaxing Li

It has been an upbeat start to the week, with Asian shares rebounding and US equity futures edging higher, after the Democrats' sweeping midterm elections victory set off a chaotic week of AI-trade unwinding and whiplash.

Markets appear to be calming somewhat after Wall Street managed to end on a higher note on Friday. Dip buyers may have been encouraged to step back in ahead of a relatively light week for major macro events.

Still, it would be too early to say markets are out of the woods - the fragile optimism will be put to the test by more tech earnings this week, including from cloud-computing firm CoreWeave, which has become a poster child for investor concerns about AI profitability amid massive build-out costs and a heavy debt burden.

Applied Materials and Cisco Systems are also due to release earnings this week. Nvidia's launch of a board probe into reports that CEO Jensen Huang was the target of a Chinese intelligence effort could add another layer of volatility to the AI trade's shaky recovery attempt.

Beyond AI, Tuesday's US CPI report will also be in focus after the jobs report last week blew past estimates and showed resilient growth in the US labour market. That bolstered the case for the Federal Reserve to hike rates next month, with markets now pricing in an 80% chance of at least a 25-basis-point increase.

Oil markets, meanwhile, are offering some relief, with prices calming after US President Donald Trump said on Sunday he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict continued to make progress.

Key developments that could influence markets on Monday:

- German trade data for September

- Euro zone Sentix index for November

- French and German debt auctions

(Reporting by Jiaxing Li in Hong Kong; Editing by Jamie Freed)