Next Week Investors will focus on U.S. inflation gauge, preliminary June data from euro zone economies, tech exhaustion concerns, and escalating trade tensions this week to assess interest rate moves.
US inflation
The personal consumption expenditures price index (PCE) is set to release on Friday, indicating a slowdown in US inflation. However, recent readings have shown unexpected sideways inflation in April, potentially undermining the argument for rate cuts. The economic calendar also includes consumer confidence, home sales, and durable goods orders.
Tech rally on watch
Tech stocks’ long-term case is solid due to strong earnings and AI potential. However, price gains, like Nvidia’s 155% year-to-date run, raise concerns about the tech rally getting stretched. Despite potential pullbacks, investors are unlikely to leave tech and growth stocks for long, as betting against tech has been a losing proposition over the last decade.
Eurozone inflation
France, Italy, and Spain are set to release preliminary June inflation data, which will set the tone for a euro zone-wide print next week. Traders expect one more cut and a 64% chance of a second by year-end, down from nearly 80% before the June meeting.
Trade tensions
China and the EU are negotiating tariffs on Chinese-made electric vehicles imported into the European market. The EU proposed provisions of up to 38.1% on imported Chinese EVs, following the US’s May tariff hike. This move exacerbates trade tensions and raises concerns about potential retaliatory measures.
Oil
Oil prices eased by 1% on Friday due to concerns about global oil demand growth being affected by a strong US dollar and negative economic news. Crude benchmarks rose by 3% for the week, while the US dollar reached a seven-week high. Lower rates could support oil prices, despite lackluster global demand.