Investing.com – The rally in U.S. markets will be put to the test this week when chipmaker Nvidia (NASDAQ:) earnings are released. U.S. inflation data is likely to underscore expectations for long-awaited interest rate cuts, while the euro zone and Australia will also release inflation data that will shed light on where interest rates are headed. Here’s your look at what’s happening in the markets in the week ahead.
- Nvidia results
Investors’ enthusiasm for artificial intelligence could be put to the test when Nvidia releases its results after the market closes on Wednesday.
The earnings report, as well as whether further corporate investment in AI is expected, could be a key turning point for market sentiment heading into a historically volatile time of the year.
Nvidia stock is up about 150% year-to-date, accounting for about a quarter of the S&P 500’s 17% year-to-date gain. But the stunning multi-year run and AI mania have also drawn comparisons to the dot-com craze that imploded more than two decades ago.
The results come at the end of an earnings season in which investors have been less forgiving of big technology companies whose earnings could not justify high valuations or huge spending on AI. Examples include Microsoft (NASDAQ:), Tesla (NASDAQ:) and Alphabet (NASDAQ:), whose shares have all been in the red since their July reports.
- US data
The highlight of the economic calendar will be Friday’s release of the Personal Consumption Expenditures (PSE) price index, the Federal Reserve’s preferred inflation measure.
Speaking at the Fed’s annual Jackson Hole symposium on Friday, Fed Chairman Jerome Powell acknowledged recent progress on inflation and said “the time has come for a policy adjustment.”
“We do not see or welcome any further deterioration in labor market conditions,” Powell added in a speech that virtually guaranteed a rate cut at next month’s monetary policy meeting, the first such cut in more than four years.
In addition to the weekly report, the economic calendar also includes a report on Monday and the revised figures for the second quarter on Thursday.
- Inflation in the Eurozone
The Eurozone data for August, due to be released on Friday, will be crucial for the European Central Bank’s interest rate decision in September.
The report, which follows national releases beginning on Thursday, comes after a small but unexpected rise in inflation in July and signals that inflation will be difficult to bring under control.
While headline inflation is likely to ease partly due to falling oil prices, attention will continue to be focused on core inflation and the services sector, where price increases have proven more persistent.
Positive surprises in the data could prompt caution, especially as traders have increasingly been expecting an interest rate cut by the ECB in recent weeks.
Market expectations are strongly leaning towards a 25 basis point rate cut on September 12, with the likelihood of further cuts by year-end being high.
- Inflation in Australia
The July figures released on Wednesday could show that the inflation rate has fallen back into the Australian central bank’s target range of 2-3 percent for the first time in three years.
Any signs that inflationary pressures are easing could draw attention to the central bank, which is seen as a global exception for its reluctance to cut interest rates, while many other central banks have already started an easing cycle or are considering it.
Investors are also hoping that Wednesday’s data may help ease consumer sentiment, which has been weighed down by high borrowing costs.
In addition, Tokyo’s August inflation report, due out on Friday, could provide further insight into Japan’s monetary policy outlook.
- Gold
has hit consecutive record highs since 2022, up over 20% so far this year, and $3,000 an ounce is now in sight.
The precious metal, traditionally considered a safe haven in times of heightened security risks and political and economic instability, has benefited from several converging factors.
Russia’s invasion of Ukraine in February 2022 triggered an initial rally in the price of gold. Rising commodity prices and the resulting inflation, which undermines the value of fiat currencies, further supported the uptrend.
Ongoing tensions in the Middle East and uncertainty surrounding the upcoming US presidential election have also contributed to gold price gains. In addition, expectations of interest rate cuts in the US are putting pressure on the dollar, making gold more attractive as it usually has an inverse relationship with the US currency.
However, gold investors should be cautious as markets are prone to frequent corrections, true to the motto “nothing goes up in a straight line” and the tendency to “trust rumors and sell facts”.
–Reuters contributed to reporting
