A Look at the Day Ahead in European and Global Markets

By Ankur Banerjee

Optimism over looming U.S. interest rate cuts has been tempered by nervousness regarding upcoming economic data. Expectations are high for AI darling Nvidia’s (NASDAQ:NVDA) earnings and tensions in the Middle East are evolving.

As a result, markets are on edge, taking a breather. The yen is near three-week highs, while the dollar remains steady but close to 13-month lows. Asian stocks dropped 0.42% on Tuesday after hitting a month-high on Monday.

Oil prices eased following a surge due to supply concerns, while gold hovers near a record peak reached last week on safe-haven flows.

Futures suggest a subdued start for European stock markets, with London stocks back from a Monday holiday.

Investors are waiting for key economic data this week, including EU inflation on Friday, which will provide signals on the European Central Bank’s policy direction ahead of its meeting on Sept. 12, where a 25 basis point rate cut is broadly anticipated.

Nvidia’s earnings on Wednesday will be crucial for an AI rally and risk appetite, as markets brace for rate cuts. Anything less than an impressive growth forecast could undermine investor confidence, leading to jittery and choppy market conditions, particularly in Europe’s technology sector following a 1% slide on Monday.

Attention is also on how European markets respond to lackluster earnings from PDD Holdings, highlighting weak demand from Chinese consumers, which resulted in a $55 billion market cap loss. Luxury companies in Europe are also feeling the pinch from reduced Chinese consumer spending.

The U.S. personal consumption expenditure price index, Fed’s preferred inflation gauge, is due on Friday. Eyes will be on this figure, especially after Fed Chair Jerome Powell hinted at a rate cut in September. Market concerns center around whether it will be a 25 bp or a larger 50 bp cut next month, with traders pricing in 100 bps of easing for the rest of the year’s three Fed meetings.

Key Developments That Could Influence Markets on Tuesday:

• Economic Events: Germany detailed GDP data for Q2

(Editing by Jacqueline Wong)