Baidu Baidu prices CNY4.4 billion senior notes due 2029 at 1.90%
Investing.com - U.S. inflation figures are set to be the major economic readings of the week ahead, particularly as a Federal Reserve interest rate decision later this month looms large. Oracle is expected to unveil its latest earnings, with the software firm anticipated to provide a fresh perspective of the state of a multi-year artificial intelligence boom. A crucial confidence vote is slated to take place in France, while the European Central Bank will deliver its latest interest rate decision on Thursday.
1. CPI in focus
Attention is turning to the consumer price index for August, a crucial gauge of inflationary pressures.
Due out on Thursday, the data from the Labor Department’s Bureau of Labor Statistics is anticipated to show that prices grew at a rate of 2.9% in August, accelerating slightly from 2.7% in July.
At that level, the Federal Reserve would likely be facing simultaneous threats to both sides of its dual mandate -- maximizing employment and maintaining price stability, defined as a long-run inflation rate of 2%.
This would leave policymakers with the knotty task of addressing a cooling labor market and sticky prices, an economic situation that could threaten to edge into a period of "stagflation" marked by high inflation, tepid growth and elevated unemployment.
So far, Fed officials, including Chair Jerome Powell, have indicated that they are likely to prioritize addressing the labor market’s easing over inflation. A rate cut could in theory spur more investment and hiring, albeit at the risk of fueling price growth.
The Fed is now in a quiet period ahead of its rate decision next week, meaning markets will have to make do with prior comments from officials as they attempt to map out the path of interest rates.
2. Oracle earnings
On the earnings front, Oracle will be the next company to offer a quarterly report that could provide a fresh glimpse into the state of a boom in enthusiasm around artificial intelligence.
In a note to clients, analysts at Vital Knowledge said two numbers from the software group will be particularly important -- backlog, measured by remaining performance obligations, and free cash flow.
Wall Street is anticipating the former will stand at roughly $150 billion. The latter, meanwhile, is tipped to come in at $1.8 billion, recovering from a negative cash flow of $2.9 billion in the prior quarter, thanks to a decline in capital expenditures.
In June, Oracle lifted its annual revenue forecast, citing in part strong demand for its cloud services which help companies enhance their AI infrastructure.
CEO Safra Catz told analysts at the time that total revenue for its fiscal 2026 would be at least $67 billion. That would translate to full-year revenue expansion of around 16.7%, up from Oracle’s previous outlook of 15%.
3. French confidence vote ahead
International politics will come to the fore on Monday, when the French government is set to hold a confidence vote on Prime Minister Francois Bayrou’s fiscal plan.
Should a collection of opposition parties vote against the government, as is broadly anticipated, Bayrou would be forced to submit his resignation to French President Emmanuel Macron.
France’s government has set ambitious deficit reduction targets, looking to bring the shortfall down from 4.6% of gross domestic product next year to 2.8% by 2029. In order to meet these goals, a combination of spending cuts and other structural reforms have been proposed that are altogether worth 43.8 billion euros.
But the viability of the plan is a cause of deep uncertainty, as several sections of it -- including a proposed abolition of public holidays -- have drawn fierce resistance from voters.
In the wake of Bayrou’s announcement of the confidence vote last month, French government bond yields soared to their highest since March. Last week, the country’s 30-year sovereign debt yield rose to a level not seen since June 2009. Yields typically move inversely to prices.
"It looks like very few of the opposition parties have plans to tackle France’s 5%+ of GDP budget deficit and would prefer to bring down the government," analysts at ING said in a note.
4. ECB decision
The ING analysts added that they anticipate the European Central Bank will leave interest rates unchanged at its meeting this week.
However, they noted that the debate between supporters of keeping borrowing costs steady and those in favor of a rate cut "will likely be more heated than markets have priced in."
Perceived hawkish commentary from ECB President Christine Lagarde in July has weighed on expectations for impending rate moves, with the central bank eyeing slightly higher-than-anticipated inflationary pressures since its last gathering and faster-than-expected economic growth.
These developments, along with ongoing uncertainty over U.S. tariffs, have fueled bets that the ECB will provide little clear guidance around its own policy trajectory -- and will back keeping the key deposit rate unaltered at 2% for a second straight meeting.
5. Chinese data
Along with economic indicators out of the U.S., investors are keeping tabs on figures from China.
China’s export growth slowed in August, as momentum from a temporary trade truce with the U.S. waned, while imports also weakened amid sluggish domestic demand. Exports rose by 4.4% in August from a year earlier in dollar terms, missing forecasts of 5.0% and easing from July’s 7.2% gain.
The country’s trade balance in turn grew to a surplus of $102.30 billion, customs data showed on Monday, more than expectations of $99.40 billion.
Chinese inflation numbers on Wednesday, including a look at consumer and factory prices, will likely be in focus for traders keen to get a clearer outlook for the world’s second-largest economy.