Investors are keeping a close eye on U.S. inflation data, set to dominate economic headlines, as the Federal Reserve’s upcoming interest rate decision later this month remains a central concern. In the corporate sphere, Oracle (NYSE:ORCL) is expected to release its latest quarterly earnings, offering insights into the ongoing momentum behind artificial intelligence investments. Meanwhile, political developments in France and decisions by the European Central Bank (ECB) could also influence market sentiment.
U.S. Consumer Price Index in Focus
The Consumer Price Index (CPI) for August, due Thursday, is shaping up as the week’s most critical economic report. Analysts expect a year-on-year increase of 2.9%, slightly higher than July’s 2.7%. Such a reading would pose a challenge for the Federal Reserve, as it balances its dual mandate of maximizing employment while maintaining price stability around its 2% long-term inflation target.
With the labor market showing signs of slowing, Fed policymakers face the delicate task of managing both softening job growth and persistent price pressures. The risk of entering a period of stagflation—characterized by high inflation, weak growth, and elevated unemployment—remains a key concern. Federal Reserve officials, including Chair Jerome Powell, have suggested that supporting employment may take precedence over curbing inflation, with a potential rate cut seen as a measure to stimulate investment and hiring, albeit with inflationary risks.
Oracle Earnings Release
Oracle’s upcoming earnings report will be closely watched for clues on the state of the AI-driven software sector. Analysts at Vital Knowledge highlight two key metrics: backlog, measured by remaining performance obligations, and free cash flow. Wall Street anticipates a backlog of around $150 billion and free cash flow of $1.8 billion, rebounding from a negative $2.9 billion in the previous quarter due to lower capital expenditures.
In June, Oracle raised its annual revenue forecast, citing robust demand for its cloud services that support AI infrastructure. CEO Safra Catz projected total fiscal 2026 revenue of at least $67 billion, implying growth of roughly 16.7% for the year, up from the previous outlook of 15%.
French Confidence Vote
Political developments in France are also in focus, with a confidence vote scheduled for Monday on Prime Minister François Bayrou’s fiscal plan. A likely defeat could force Bayrou to resign, further heightening political uncertainty. The government aims to reduce the deficit from 4.6% of GDP next year to 2.8% by 2029, with spending cuts and structural reforms valued at €43.8 billion. Resistance to measures such as reducing public holidays has already fueled skepticism among voters.
Following the announcement of the vote, French government bond yields climbed to their highest levels since March, with the 30-year yield reaching levels unseen since June 2009. Analysts at ING note that opposition parties appear more focused on challenging the government than addressing the deficit, adding to market uncertainty.
European Central Bank Decision
The ECB is expected to hold interest rates steady at its meeting this week. Analysts caution, however, that debates within the central bank—between those advocating steady rates and those favoring cuts—may be more intense than market expectations suggest. Hawkish commentary from ECB President Christine Lagarde in July, alongside faster-than-expected growth and slightly elevated inflation, has tempered expectations for immediate policy shifts. The key deposit rate is expected to remain at 2% for a second consecutive meeting.
Chinese Economic Data
Finally, investors will monitor economic figures from China. Export growth slowed in August to 4.4% year-on-year in dollar terms, missing expectations of 5.0% and down from July’s 7.2%. Imports also slowed, reflecting weak domestic demand. The trade surplus, however, widened to $102.3 billion, surpassing forecasts of $99.4 billion. Midweek inflation data, including consumer and producer prices, will provide additional guidance on China’s economic trajectory, an important indicator for global markets.
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