Tech giants' reports on the way: Deutsche Bank warns investors
Four out of seven tech giants are expected to report this week, as markets wait to see if massive investments in artificial intelligence will continue to fuel profits or lead to a painful shake-up in stocks.
Economists at Deutsche Bank, one of the world's largest banks, conducted a weekly economic review, focusing on interest rates in the USA, inflation data in Europe, and what is happening in the major economies of Asia.
"Global markets are starting the week with a more positive trend, against the backdrop of falling oil prices and reduced tensions in the Middle East, which support investor sentiment. However, investors continue to balance between a positive outlook for corporate earnings and the ongoing risks stemming from the geopolitical situation, inflation, and trade policy. Oil prices, although they have fallen, are still higher than the levels that prevailed before the outbreak of the conflict, while new headlines on the subject of tariffs add to the uncertainty surrounding economic policy.
Against this backdrop, the earnings season is entering its busiest phase. This week, companies representing about 38% of the market value of the STOXX Europe 600 index and about 34% of the market value of the S&P 500 index are expected to publish their results, including four of the seven technology giants known as the "Magnificent 7".
Markets will be watching closely to see if investments in artificial intelligence continue to be reflected in profit growth and the maintenance of high profit margins. Alongside the earnings season, investors will also focus on central bank interest rate decisions and key macro data, including interest rate decisions by the Federal Reserve, the Bank of England, and the Bank of Japan, alongside the publication of US GDP data for the second quarter, core PCE inflation in the US, GDP and inflation data in the Eurozone, and Purchasing Managers' Index (PMI) in China.
USA: The Federal Reserve is expected to leave interest rates unchanged
The Federal Open Market Committee (FOMC) meeting, which will take place on Wednesday, is expected to be the focus of attention this week, with the prevailing assessment being that there will be no change in interest rate policy. The Consumer Price Index (CPI) for June surprised to the downside, as both headline inflation and core inflation were lower than expected and reached their lowest levels since the beginning of 2026. Alongside a weaker-than-forecast employment report (Nonfarm Payrolls), the data undermined the hawkish tone recently adopted by the Federal Reserve and strengthened the assessment that policymakers will continue to take a patient approach.
However, geopolitical risks continue to weigh on the outlook. Oil prices are still significantly higher than the levels recorded in June, while tensions between the USA and Iran show no signs of easing, which raises concerns about broader regional disruptions and renewed inflationary pressures.
Investors will also focus on the publication of key macro data. On Tuesday, the Conference Board Consumer Confidence Index is expected to be published, which is expected to remain near its recent high levels and indicate the resilience of the American consumer. On Thursday, the first estimate for GDP growth in the second quarter will be published, with the market consensus standing at an annual growth rate of 2.5%, compared to 2.1% in the first quarter. In addition, PCE inflation data for June will be published, with core inflation expected to remain stable at an annual level of 3.4%.
Bottom line: The assessment is that the Federal Reserve will leave interest rates unchanged, while balancing between more moderate inflation data and geopolitical risks and the rise in energy prices.
Eurozone: Inflation data in focus
After the European Central Bank (ECB) left interest rates unchanged last week, attention returns to macro data, as a number of significant figures are expected to be published this week. The focus will be on inflation data for July, which will be published on Friday.
In June, headline inflation in the Eurozone fell from 3.2% in May to 2.8%, the lowest level since February. Core inflation also fell from 2.6% to 2.4%. However, the rise in energy prices following the escalation in the Middle East may support some increase in headline inflation during July, while core inflation is expected to remain relatively stable.
During the week, inflation data for Spain, Germany, France, and Italy will be published. In addition, investors will monitor the Ifo Business Climate Index in Germany, published today, to examine whether the recently announced reforms are beginning to strengthen business confidence in the largest economy in the Eurozone. Eurozone GDP data for the second quarter will also be in focus, and will provide an up-to-date picture of the growth rate of the European economy ahead of the summer months.
Bottom line: After the ECB left interest rates unchanged last week, the focus of attention shifts to inflation data for July. The rise in energy prices following the escalation in the Middle East may affect headline inflation, and the data is expected to shape market expectations regarding the European Central Bank's policy in the coming months.
Japan: The Yen and the Central Bank in focus
The focus of attention this week in Japan will be on the Bank of Japan's (BoJ) interest rate decision, inflation data in Tokyo, and economic activity data, as investors continue to monitor the Japanese Yen, which is trading near multi-decade lows against the US Dollar. Against this backdrop, concerns are growing about imported inflation following the jump in oil prices, and the possibility that the central bank will need to respond by changing policy.
On Wednesday, investors will monitor Japanese government bond auctions for two-year and thirty-year terms, with the issue of fiscal stability in focus, against the backdrop of Prime Minister Sanae Takaichi's plan to raise over 370 trillion yen in public and private investment by 2040.
On Thursday, key macro data is expected to be published. The unemployment rate is expected to remain unchanged at 2.5%, while headline inflation in Tokyo is expected to rise to 2.0% on an annual basis, compared to 1.7% in the previous month. Core inflation is expected to rise from 1.6% to 1.8%. At the same time, industrial production is expected to recover with an increase of 0.4% on a monthly basis and 1.8% on an annual basis, while retail sales are expected to fall by 0.5% compared to the previous month and slow to an annual rate of 2.3%.
On Friday, the Bank of Japan is expected to leave interest rates unchanged at 1.0%, but investors will focus mainly on the updated Outlook Report in an attempt to find hints regarding the timing of the next interest rate hikes.
Bottom line: Inflation, wage growth, and a strong labor market continue to support the continued normalization of monetary policy, even if private consumption is still weak. The base scenario remains one more interest rate hike during 2026, although the central bank is expected to continue to take a cautious approach.
China: All eyes are on the Purchasing Managers' Indices and the Politburo meeting
China is expected to publish this week the official Purchasing Managers' Indices (PMI) for the manufacturing and services sectors, which will provide an up-to-date picture of the strength of economic activity in the country.
The manufacturing PMI will be examined mainly in light of changes in production volume, new orders, and export demand, while the services index is expected to indicate whether the services and construction sector continues to support economic growth. At the same time, attention will also be turned to the Politburo meeting of the Communist Party, where policymakers are expected to examine the state of the economy and define priorities for the second half of the year. Investors will look for signals regarding additional steps to encourage domestic demand, stabilize the real estate market, and continue investments in strategic sectors.
Bottom line: The Purchasing Managers' data and the Politburo meeting are expected to clarify whether the recovery of the Chinese economy is expanding beyond the manufacturing sector geared towards exports. The assessment is that the government will continue a policy of targeted support, with an emphasis on strengthening private consumption, promoting advanced technologies, and innovative industries. Stronger activity data and clear signs of expanding support for domestic demand may strengthen investor confidence in China's growth forecast.
