This week, global markets are set to focus on a mix of economic data, corporate earnings, and political developments. The U.S. inflation report will be a key driver, as investors anticipate how the Federal Reserve might respond with interest rate adjustments later this month. Corporate watchers are eyeing Oracle (NYSE:ORCL) for insights on the AI sector, while European political events and ECB decisions could further influence market sentiment.
U.S. Inflation Data in Focus
The Consumer Price Index (CPI) for August, scheduled for Thursday, will be the centerpiece of the week. Economists expect a 2.9% year-over-year increase, slightly above July’s 2.7%. This reading will test the Fed’s balancing act between maintaining price stability and supporting employment, its dual mandate.
With signs of a slowing labor market, the Fed faces the challenge of tackling both softening employment growth and persistent inflation. Markets are weighing the potential for a rate cut, which could stimulate hiring and investment, though it also carries the risk of further upward pressure on prices. Chair Jerome Powell and other Fed officials have indicated that employment trends may take precedence over inflation concerns in their policy decisions.
Oracle Earnings Preview
Oracle’s upcoming results will be closely scrutinized for clues about the ongoing AI boom. Analysts are focusing on two metrics: backlog, represented by remaining performance obligations, and free cash flow. Wall Street expects the backlog to reach roughly $150 billion and free cash flow to rebound to $1.8 billion from a negative $2.9 billion in the prior quarter, largely due to reduced capital expenditures.
Earlier this year, Oracle revised its revenue outlook for fiscal 2026, citing strong demand for cloud services that underpin AI applications. CEO Safra Catz projected revenue of at least $67 billion, implying a growth rate of roughly 16.7%, up from a previous forecast of 15%.
Political Developments in France
France will hold a confidence vote on Monday regarding Prime Minister François Bayrou’s fiscal plan. A defeat could force Bayrou to resign, increasing political uncertainty. The government aims to lower the deficit from 4.6% of GDP next year to 2.8% by 2029, with €43.8 billion in proposed reforms and spending adjustments. Certain proposals, including changes to public holidays, have already faced opposition from voters.
Following the announcement, French government bond yields jumped, with the 30-year yield reaching levels not seen since June 2009. Analysts warn that opposition parties seem more focused on challenging the government than addressing structural fiscal issues, adding to market uncertainty.
European Central Bank Update
The ECB is widely expected to keep interest rates steady this week. Still, debate within the bank between officials favoring cuts versus steady policy may create heightened market volatility. Hawkish signals from ECB President Christine Lagarde in July, combined with stronger-than-expected growth and slightly elevated inflation, have made investors cautious about any immediate rate adjustments. The key deposit rate is likely to remain at 2% for a second consecutive meeting.
China’s Trade and Inflation Data
China’s latest trade figures will also draw attention. Exports in August rose 4.4% year-on-year in dollar terms, missing the forecast of 5% and slowing from July’s 7.2%. Imports weakened amid subdued domestic demand. The trade surplus, however, widened to $102.3 billion, exceeding expectations of $99.4 billion. Upcoming inflation data, including consumer and producer prices, will be closely monitored to gauge the strength of China’s economy and its potential impact on global markets.
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