Two key events of the upcoming week will be further large tech earnings and the July employment report for the US. Also, investors' focus will be on BoE rate decision.

BoE rate decision

Markets are divided on whether policymakers will return to a 25bps rate rise following a 50bps boost in June when the BOE meets its most recent rate-setting meeting on Thursday.

Since February, the rate of inflation hasn't increased, and there are indications that the generalised pressures on prices are beginning to ease.

However, because June's inflation rate of 7.9% was the highest among developed nations and is still much above the BOE's 2% objective, markets shouldn't rule out the potential of a 50-bps increase, especially if policymakers believe they may need to raise interest rates again in September.

Investors have criticised the BOE for being behind the times as a result of inflation continuing to rise faster than anticipated after 13 consecutive rate hikes since December 2021, which raised the likelihood of a recession.

Eurozone Data

In today’s session, a preliminary estimate of second-quarter GDP and July inflation will be released by the Eurozone. These numbers will be widely monitored as the discussion over whether the European Central Bank will increase interest rates again at its next meeting in September continues.

While the inflation rate is predicted to just marginally decrease, the GDP data is anticipated to demonstrate that the bloc's economy resumed growing in the second quarter.

While inflation in the eurozone has decreased by half from its high in last October, it is still far over the ECB's objective of 2% at 5.5%.

On Thursday, the ECB increased its deposit rate to a record high, but by omitting a blatant signal about future increases from its policy statement, it made it obvious that another increase at its forthcoming September meeting should not be assumed.

US Nonfarm payrolls

According to predictions made for Friday's U.S. jobs report, the economy gained 184,000 jobs in July, but average hourly wages decreased and the unemployment rate stayed at a record-low 3.6%.

The perception that the economy is on its way to a so-called "soft landing" of declining inflation and robust growth has been significantly shaped by the labour market's resilience.

When Fed Chair Jerome Powell stated last week that the central bank's staff no longer predicts a U.S. recession and that inflation had a chance of returning to its 2% objective without significant job losses, investor confidence increased.

The Fed increased rates by another 25 basis points last Wednesday, bringing them to their highest level since 2007. The Fed did not rule out more rate increases, saying they would be based on upcoming economic data.

Worries that the Fed must keep raising rates to control inflation may be sparked by indications that the economy is expanding too quickly. On the other hand, a sharp decline in employment would reawaken concerns about a recession.

More Earnings

The mega-caps Apple and Amazon are scheduled to release earnings on Thursday after the market close, continuing the earnings season.

A boom in tech stocks that has been spurred in part by anticipation over advancements in artificial intelligence has some investors concerned that it may collapse. The S&P 500 information technology sector has increased by about 46% year to far, while the tech-heavy Nasdaq 100 has increased by close to 44%.

The case for those who think the high values of mega caps are warranted was strengthened by optimistic estimates from Meta and results from Alphabet last week.

(Sources: investing.com, reuters.com)