U.S. Inflation and Rate Moves: Investors will closely watch the U.S. inflation gauge, the personal consumption expenditures price index, due on Friday, which could impact expectations for interest rate moves. Recent readings have shown unexpected trends, raising uncertainty about imminent rate cuts. Additionally, the week includes June consumer confidence data and May home sales figures, durable goods orders, and a third estimate of Q1 economic growth.
Tech Rally Concerns: The ongoing tech stock rally, highlighted by Nvidia’s 155% YTD gain, has sparked concerns of overheating. Despite these worries, tech stocks are expected to remain attractive, with potential pullbacks seen as opportunities for investors to buy the dip. Historically, betting against tech has proven unprofitable, with the Nasdaq 100 advancing over 400% in the last decade.
Oil Prices and Economic Impact: Oil prices dipped 1% on Friday due to a stronger U.S. dollar and negative global economic news but ended the week up about 3%. The Federal Reserve’s cautious approach to rate cuts contrasts with more dovish stances elsewhere, potentially supporting oil prices. Geopolitical risks are also likely to keep oil prices elevated in the coming week.
Eurozone Inflation Data: Preliminary June inflation data from France, Italy, and Spain, due Friday, will set the stage for the euro zone-wide print the following week. Traders are keen to assess how many rate cuts the European Central Bank might implement this year, with one more cut expected and a 64% chance of a second by year-end.
Escalating Trade Tensions: Trade tensions are escalating as China and the European Union prepare for talks on proposed tariffs on Chinese-made electric vehicles. The EU’s provisional duties of up to 38.1% on Chinese EVs are set to take effect by July 4, potentially fueling further trade conflicts between the West and Beijing.
