A Look Ahead in European and Global Markets by Ankur Banerjee

Optimism surrounding potential U.S. interest rate cuts has been tempered by uncertainty over upcoming economic data, sky-high expectations for Nvidia’s (NASDAQ: NVDA) earnings, and evolving tensions in the Middle East. These factors have left markets on edge, taking a pause as the yen hovers near three-week highs and the dollar remains steady but close to 13-month lows. Meanwhile, Asian stocks declined by 0.42% on Tuesday after hitting their highest level in a month on Monday.

Oil prices have eased following a surge in the previous session due to supply concerns, while gold continues to hover near last week’s record peak, driven by safe-haven demand.

Futures suggest that European stock markets are likely to open on a subdued note, with London stocks returning from a holiday on Monday.

Investors are closely watching key economic data this week, including EU inflation figures due on Friday, which will provide insights into the European Central Bank’s policy direction ahead of its September 12 meeting. Traders have largely priced in a 25 basis point rate cut.

Nvidia’s earnings report on Wednesday will be crucial in determining the trajectory of an AI-driven market rally and overall risk appetite, especially as markets brace for rate cuts. Anything short of a spectacular growth forecast could shake investor confidence, leaving markets jittery and volatile. Attention will also be on European technology stocks, following a 1% drop in the tech index on Monday.

Another key factor to monitor is how European markets react to disappointing earnings from Temu-owner PDD Holdings, which highlighted weak demand from Chinese consumers, wiping out $55 billion in market capitalization. European luxury companies have also been impacted by reduced spending from China.

The U.S. personal consumption expenditure price index—the Federal Reserve’s preferred inflation gauge—is set to be released on Friday and will be closely analyzed, particularly after Fed Chair Jerome Powell all but confirmed a rate cut in September. The market’s primary concern is the size of the cut—whether it will be a 25 basis point reduction or a more substantial 50 basis point cut next month. Traders are currently pricing in 100 basis points of easing across the remaining three Fed meetings this year, with upcoming data set to influence the Fed’s direction.

Key Developments to Watch on Tuesday:

• Economic events: Detailed Q2 GDP data from Germany.

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