Market Report.
💬 Last Friday, Powell’s Jackson Hole remarks suggested the Fed might cut rates if economic risks shift, aiming to support jobs. Markets reacted sharply: U.S. stocks surged, Treasury yields dropped, confirming Fed leadership remains central to market sentiment.
📉 Since June 2022’s 9.1% CPI peak, the Fed kept rates high to curb inflation; usually, this slows growth and jobs. So far, the economy held up better than expected, fueling the soft-landing narrative—lower inflation without recession.
🤔 Powell has acknowledged a high level of uncertainty that is making the Fed’s job difficult, with “sweeping changes” in tax, trade, and immigration policies shifting the balance of risks. While the labor market remains strong and the economy has shown resilience, he said downside dangers are rising, and the Fed needs to avoid a stagflation scenario.
🚫 However, Powell stopped short of explicitly endorsing rate cuts, emphasizing that FOMC members will make decisions based solely on their assessment of the data and economic outlook.
👥 Meanwhile, President Trump has fired Federal Reserve Governor Lisa Cook, citing allegations of false statements on mortgage applications. Cook has stated that Trump has no legal authority to fire her “for cause” and that she will not resign, vowing to continue carrying out her duties as a Fed governor. This move by Trump could be challenged in federal court, and the Supreme Court may ultimately rule on the legality of Cook’s firing.
⚖️ If the firing is upheld, it would put Trump on track to have a Fed board majority comprised of his own appointees, raising concerns about the central bank’s independence.
💪 This could be seen as Trump’s strong entry into the Federal Reserve, as it leaves more Fed members favorable to Trump, making the Fed more favorable to Trump, who wants to cut rates, and that would boost Wall Street.
🏛️ Government participation in private companies is now official. According to Intel’s own publication, Intel Corporation has entered into a Warrant and Common Stock Agreement with the U.S. Department of Commerce (DOC). The U.S. government will provide $8.87 billion in disbursements to Intel, including $5.7 billion in accelerated funding and $3.17 billion for the Secure Enclave program. In exchange, Intel will issue up to 433 million shares of common stock to the DOC, as well as warrants to purchase up to 240 million additional shares. The shares and warrants are subject to various restrictions, including limitations on transferability and voting requirements.
🇺🇸 Intel CEO Lip-Bu Tan stated the company is committed to ensuring advanced technologies are “American made” as the only U.S. semiconductor company with leading-edge logic R&D and manufacturing. Commerce Secretary Lutnick previously stated the government should get an equity stake in exchange for CHIPS Act funding.
💼 President Trump has vowed to impose “substantial” new tariffs and restrict U.S. chip exports for all countries that do not remove digital taxes and related regulations targeting American technology companies. Trump stated that digital services taxes (DSTs) imposed by dozens of countries are “designed to harm, or discriminate against, American technology.” He has put all countries with such DSTs, legislation, rules, or regulations “on notice” that unless these actions are removed, he will impose additional tariffs on their exports to the U.S.
🌍 This is the latest escalation in Trump’s efforts to pressure U.S. trade partners into dropping these taxes, which typically target large American tech firms like Meta, Alphabet, and Amazon.
📊 Nvidia is set to report fiscal Q2 2025 earnings on Wednesday, August 27, after market close. Key things to watch for include consensus estimates: Analysts expect around $46 billion in revenue and $1.01 EPS for Q2, with projections of $53-54 billion in revenue for Q3. Expect a heavy focus on continued strength in AI and data center demand, which now makes up the majority of Nvidia’s sales. Updates on the Blackwell GPU ramp and demand from major cloud providers will be closely watched.
🇨🇳 China sales and restrictions: Nvidia recently secured a deal to ship its China-specific H20 chip, but there is skepticism about future China demand amid regulatory uncertainty and pressure to use domestic chips.
📈 Nvidia’s stock has risen 33% YTD, reflecting continued AI sector enthusiasm, and any “beat and raise” guidance could extend the bullish moment. CEO Jensen Huang’s statements about AI demand, China strategy, and the product roadmap will be a focal point for analysts and investors.
Market View:
📉 Although last week ended on a high note with Powell’s words, this week has started with less optimism, flying the flag for two important events: one being Nvidia’s earnings presentation on Wednesday night, and the other the US PCE inflation data on Friday.
📊 Meanwhile, S&P 500 futures remain passive but very close to their historical highs, currently trading at 6448 points. Nasdaq futures are slightly weaker, trading at 23455 points at the moment.
📉 The Fed has not issued a clear message, and the DXY dollar index remains around the 98-point mark. In these circumstances, the EUR/USD pair is trading sideways below 1.17.
🇪🇺 In Europe, futures are in a very similar situation to those in the US. DAX 40 futures have slightly retreated from their historic highs, currently standing at 24180 points. Eurostoxx 50 futures managed to surpass 5500 points last Friday but are now retreating to 5415 points.
📈 The crude oil market seems to have picked up since last Wednesday, rising from $66 and approaching $68 per barrel for Brent.
💰 In line with our forecasts, gold futures have rebounded from the $3350 we noted last week and are currently at $3425.
📉 Lastly, Bitcoin has lost the support of $111,000 and is currently below $109,000, from where it is rebounding towards the $110,000 zone.
