The FTSE 100 is set to surrender some of its recent momentum as investors weigh persistent US inflation, elevated interest rates and mounting government debt ahead of the Federal Reserve’s Jackson Hole gathering.
The UK benchmark is facing a more cautious session as markets turn their attention to the annual central banking symposium, where policymakers are expected to offer fresh clues on the path for US interest rates.
Oil prices, meanwhile, have eased, with Brent crude returning to about $87 a barrel as hopes for an Iran-Oman framework reduce fears of a prolonged disruption to supplies through the Strait of Hormuz.
The retreat in crude prices offers some relief to markets that have been increasingly sensitive to the inflationary consequences of energy shocks.
The focus on Wall Street is nevertheless being dominated by Nvidia, whose latest results have propelled the artificial intelligence trade back into the spotlight.
The chipmaker reported quarterly revenue of $96 billion, comfortably exceeding expectations, and forecast revenue of $108 billion for the next quarter. It also signalled that demand for its AI infrastructure could remain strong through 2028.
The scale of the numbers has reinforced the extraordinary growth underpinning the technology sector’s rally, but it has also revived a more uncomfortable question for investors: how long can spending on artificial intelligence continue to rise before returns are forced to catch up with the investment?
US stocks are expected to open higher, with Nvidia’s results providing enough momentum to offset some of the pressure from stubborn inflation and interest-rate concerns.
The market’s immediate reaction is likely to remain focused on whether the AI boom can continue to justify the enormous sums being committed to data centres, chips and computing infrastructure.
For European investors, the competing forces leave the FTSE 100 caught between falling energy costs and a broader global market wrestling with inflation, fiscal pressures and the prospect of interest rates remaining higher for longer.
The Jackson Hole meeting could therefore prove an important test for markets that have spent much of the year trying to price the timing and scale of future rate cuts, while Nvidia’s results provide a fresh reminder that the technology investment cycle remains one of the most powerful forces driving global equities.
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