European Markets Edge Up as Investors Eye U.S. Inflation Data and Nvidia Earnings

European stocks saw modest gains this week as investors keenly monitored upcoming U.S. inflation data and Nvidia's earnings report. The market's upward momentum was echoed across major indices, with the UK's FTSE 100 index rising by 0.20%, Germany's DAX 30 by 1.70%, and France's CAC 40 by 1.71%. These gains follow last week's notable performance in global risk assets, driven by U.S. Federal Reserve Chair Jerome Powell's strong signals towards potential rate cuts.
Investors are primarily focused on the July U.S. Personal Consumption Expenditures (PCE) Price Index, a key inflation gauge for the Federal Reserve. The June core PCE remained flat month-over-month, posting a year-over-year increase of 2.6%, which slightly beat expectations. Analysts predict that the year-over-year increase for July may dip by 0.1 percentage points to 2.5%, keeping the month-over-month figures stable. This data is crucial as it might influence the Fed's monetary policy, with market participants now expecting nearly 100 basis points in rate cuts by year-end.
On the European front, attention will be on the Eurozone's consumer price index (CPI) release on August 30th. The headline inflation rate is projected to decrease from 2.6% in July to 2.3% in August, aligning more closely with the European Central Bank’s 2% target. Meanwhile, Germany's economic health is under scrutiny, given its significant role as the "locomotive" of Europe, with recent data indicating weakness in its manufacturing and industrial sectors.
This week also brings the much-anticipated earnings report from Nvidia, which is expected to be a major market mover. As the earnings season nears its end, other notable companies like Salesforce, CrowdStrike, Marvell Technology, Autodesk, and Lululemon will also disclose their earnings.
In the energy sector, international oil prices experienced some fluctuation. WTI crude futures dropped by 0.94% to $74.83 per barrel, and Brent crude futures fell by 0.83% to $79.02 per barrel. The decline is attributed to concerns over future oil demand and economic slowdown signals. Nonetheless, the Fed's dovish stance and a weakened dollar helped oil prices reclaim much of their lost ground by week-end.
In the precious metals market, gold prices rebounded, backed by expectations of upcoming interest rate cuts. August COMEX gold futures rose by 0.39%, reaching $2508.40 per ounce, bolstered by lower U.S. Treasury yields and a softer dollar amid Fed's rate cut projections.
Adding to the strategic mix, Andrew Bailey, the Bank of England Governor, indicated that although U.K. inflation pressures are easing, further rate cuts would not be rushed. This commentary also led to adjustments in market expectations regarding future interest rate decisions.
Overall, the week ahead is filled with significant economic data releases and earnings reports, likely to influence market sentiments and provide insights into the future trajectory of fiscal and monetary policies both in the U.S. and Europe.