Nvidia, Show Us What You’ve Got – By Reuters

LONDON (Reuters) – The upcoming week promises to be eventful for financial markets, with earnings from Nvidia, a leading player in the AI sector, and essential inflation figures from the euro area and Australia capturing investor attention.

Gold continues its ascent to record levels while the U.S. dollar faces pressure amid growing speculation about potential interest rate cuts.

Here’s an overview of what to watch in the financial markets next week, compiled by a team of analysts across multiple locations.

1. Nvidia’s Earnings Report
   Investor excitement surrounding artificial intelligence will be put to the test when chip manufacturer Nvidia announces its earnings on August 28. Known for producing top-tier AI chips, Nvidia’s stock has skyrocketed by approximately 150% this year, contributing significantly to market gains. However, this impressive performance has led some to liken the current AI enthusiasm to the dot-com bubble experienced over 20 years ago. Recent disappointing earnings from major companies such as Alphabet and Tesla may indicate that investors are less forgiving, especially given the elevated valuations in the sector. Additionally, key data will be released, including the U.S. Personal Consumption Expenditures (PCE) price index, a crucial measure of inflation closely monitored by the Federal Reserve.

2. Inflation Data in Europe
   Inflation figures for the eurozone, set to be released on Friday, will be vital for the European Central Bank (ECB) as it considers a potential interest rate cut in September. The preceding national data, available from Thursday, follows an unexpected uptick in inflation for July, indicating ongoing challenges in controlling prices. While headline inflation might decline with falling oil prices, core inflation and the resilient services sector remain critical concerns. Any unexpected increases in inflation may prompt caution among traders, who have recently boosted their expectations for ECB rate cuts. Eurozone business activity showed surprising strength in August, complicating the outlook.

3. Australia’s Inflation Outlook
   The Reserve Bank of Australia (RBA) faces a crucial moment as it has maintained that interest rates must remain restrictive due to persisting high inflation. Data on July inflation, due on Wednesday, could show a return to the RBA’s 2-3% target range for the first time in three years. A decrease in inflation could increase pressure on the central bank, which has been unique in its reluctance to cut rates while many other nations have initiated or are considering easing cycles. Investors will also be interested to see if the data improves consumer sentiment, which has suffered amid rising borrowing costs. Meanwhile, Japan’s inflation report on Friday may offer additional insights into its monetary policy.

4. Strength of the Euro
   The euro has reached its highest level against the dollar this year, buoyed by volatility in global markets. Diverging expectations regarding U.S. and euro area interest rates are a driving force behind this trend, with traders anticipating significant rate cuts from the Federal Reserve while forecasting more modest cuts from the ECB. However, uncertainties remain about the euro’s ability to maintain its upward trajectory, particularly as Germany’s business activity contracted more than expected in August and wage growth within the eurozone slowed.

5. Gold’s Continued Surge
   Gold has achieved record highs since 2022 and has surged over 20% in value this year, approaching the $3,000 per ounce mark. A confluence of factors, including geopolitical tensions and rising inflation, has fueled gold’s appeal as a safe-haven asset. The ongoing conflict in Ukraine has been a catalyst for its price rise, while escalating commodity prices have exacerbated inflation, diminishing the value of traditional monetary assets. Current unrest in the Middle East and political uncertainties related to the approaching U.S. Presidential election have further bolstered gold prices. Predicted U.S. interest rate cuts may also enhance gold’s attractiveness, given its inverse relationship with the dollar. However, investors should remember that market trends can be unpredictable and that the adage "nothing goes up in a straight line" often holds true.