Issue #21 - Market Chaos: AI Wars, Tariff Turmoil, and the Fed's Big Gamble!

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What’s in this issue;

In this week's newsletter, we unpack the recent turbulence in the stock market, which experienced its worst week since late May. Investor confidence took a hit due to the Federal Reserve's decision to hold interest rates steady and the disappointing U.S. jobs report. Geopolitical tensions, including renewed trade disputes, compounded market uncertainty.

Meanwhile, advances in AI are under the spotlight as Uber Eats introduces AI-powered menu features and Meta plans a massive $72 billion investment in AI infrastructure by 2025. In the energy sector, OPEC+ has announced an increase in oil production, which is impacting market dynamics.

On the economic front, the Bank of England is expected to cut interest rates amid inflation concerns, and the IMF has raised its global growth forecast despite ongoing risks. As we continue through earnings season, key reports from companies like AMD and Disney are poised to influence market sentiment. Geopolitical issues such as increased

U.S. tariffs and a significant earthquake near Russia's Kamchatka Peninsula add further complexity to the global landscape. On a cultural note, initiatives like Pope Leo's address to youth and diplomatic developments in the Middle East highlight important global conversations. We invite you to join our investment group discussions to engage more deeply with these topics.

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Weekly Movement - Heatmaps

Stock market experienced its worst week since late May as multiple factors shook investor confidence, causing a sharp selloff in U.S. equities.

The downturn started after the Federal Reserve held interest rates steady and indicated no urgency for cuts, disappointing markets that had bet on imminent easing.

Sentiment worsened when the Fed’s preferred inflation gauge came in higher than expected, and accelerated further after the July jobs report revealed job growth was far weaker than anticipated, alongside significant downward revisions to previous months’ data.

President Trump’s public allegation of “rigged” jobs numbers and threats to dismiss the Bureau of Labor Statistics chief fueled concerns over the independence of key economic institutions.

Trade tensions also returned to the forefront as the Trump administration reinstated tariffs on several U.S. trading partners, heightening uncertainty for global markets.

Amid these developments, investors contended with mixed results from major tech companies: Meta and Microsoft reported strong quarters, Amazon disappointed, and Apple met expectations but forecast a substantial tariff hit. The S&P 500 fell 2.4% for the week, the Nasdaq dropped 2.2%, and the Dow plunged 2.9%, marking their steepest weekly losses in over two months and reinforcing a climate of volatility and caution.

What is Moving the Markets

Uber Eats Rolls Out AI-Powered Menus with Smart Photos and Descriptions

Uber Eats is introducing new generative AI features to enhance its menus, including AI-generated descriptions for menu items, improved and digitally altered food photos, and AI-summarised customer feedback to help both businesses and users quickly identify important issues.

Customers can now upload their own food photos with orders, potentially earning in-app credits if their images are selected for use, and a new Live Order Chat feature lets restaurants communicate with customers in real time to resolve issues before orders are dispatched.

These updates aim to improve the visual and informational quality of menus as well as order accuracy, though questions remain about the reliability and authenticity of AI-modified content.

Meta to Spend Up to $72 Billion on AI Superclusters in 2025 as Infrastructure Arms Race Intensifies.

Meta plans to spend up to $72 billion on AI infrastructure in 2025, nearly doubling its previous outlay as it accelerates building massive data centers and supercomputing clusters to lead in the AI arms race.

This investment will support projects like the Prometheus and Hyperion superclusters—one of which could reach the power footprint of Manhattan—and marks a strategic shift, with Meta betting that owning unrivaled compute capacity is crucial for developing advanced AI models and retaining top talent via its new Superintelligence Labs unit.

These efforts, powered in large part by booming AI-driven ad revenues, come despite environmental concerns and heavy losses in other segments, as Meta aims to transform itself beyond social media and pave the way for “personal superintelligence” in future devices like smart glasses and VR headsets.

Oil Production and Energy Sector

OPEC+ has announced a production increase of 547,000 barrels per day for September 2025, marking the sixth consecutive monthly hike as the group continues to unwind the 2.2 million barrels per day in voluntary cuts introduced in 2023.

The move, agreed upon by key members like Saudi Arabia, Russia, the UAE, and Iraq, is aimed at regaining market share amid a stable global economic outlook and low oil inventories.

While some production cuts totaling 1.65 million barrels per day will remain in place through 2026, this ramp-up in output has put downward pressure on oil prices and influenced energy sector stocks.

The shift signals OPEC+’s strategic pivot from price support toward supply expansion, with the next policy meeting set for September 7 to reassess market dynamics.

Top Economic News

Bank of England Set to Cut Interest Rate to 4.0% Amid Economic Uncertainty and Inflation Concerns

The Bank of England is expected to cut its policy interest rate by 25 basis points to 4.0% at its August meeting, marking the fifth cut since early 2023. This comes amid mixed signals: weak economic growth and job losses but rising inflation at 3.7%, above the 2% target. The decision may not be unanimous, reflecting concerns about inflation persistence and government wage policies.

IMF Raises Global Growth Forecast for 2025 Despite Persistent Inflation Risks

The IMF’s July 2025 World Economic Outlook projects global growth at 3.0% for 2025 and 3.1% for 2026, revising upwards since April. Inflation globally is expected to fall but U.S. inflation will remain above target. Risks include higher tariffs, geopolitical tensions, and uncertainty, with emphasis on restoring economic confidence and predictability.

U.S. Tariffs Escalate Trade Tensions with Canada and Global Partners

U.S. tariffs continue to impact global trade dynamics, with recent tariff increases affecting Canada, Asia, and South Africa, and causing strain in trade relations. Notably, Trump administration has raised Canada’s trade tariff to 35%, and tariffs are causing price increases in Canadian goods.

Inflation Across Europe & US

Headline Rates

• Euro Area: 2.0% year-on-year, unchanged from June; now at the ECB’s target, core inflation also steady at 2.3%.

• United States: 2.7% year-on-year, up from 2.4% in June; this is the highest since February 2025, with core inflation at 2.9%.

Recent Dynamics

Euro Area:

• Inflation has stabilised at 2.0% through June and July, aligning with the ECB’s target.

• Drivers: Lower energy prices (energy prices fell 2.5% YoY), but food, alcohol, and tobacco prices continue to rise slightly (3.3% YoY).

• Services inflation slowed to 3.1% in July from 3.3% in June.

• Core inflation (excluding energy, food, alcohol & tobacco): steady at 2.3%, lowest since January 2022.

United States:

• Inflation ticked up in June (2.4%) and July (2.7%), after several months of easing.

• Key contributors: Food (+3.0%), transportation services (+3.4%), used cars/trucks (+2.8%), while energy costs fell less sharply (-0.8% YoY).

• Monthly CPI rise: 0.3% for June, the largest monthly increase in five months.

Key Insights

• Euro Area inflation is now stable at the ECB target (2.0%) for two consecutive months.

• US inflation reversed its prior cooling trend, driven by higher food and service costs and less relief from energy prices.

• Both regions maintain positive, but moderate, inflation, with the US showing a recent upturn.

Things I’m Paying Attention To

Weaker Pound Keeps Gold Steady Near £2,500 Despite Stronger US Dollar and Tariff Pressures

A weaker pound is helping gold remain near £2,500 per ounce despite pressure on the metal in US dollars, where it has fallen 1.7% this week due to a stronger dollar boosted by confirmed trade deals, stronger-than-expected US GDP figures, and fading hopes of a near-term rate cut; this has pushed sterling to a two-month low against the greenback. Meanwhile, silver has fallen more sharply, losing over 4% this week to around £27.62.

The White House has confirmed new tariff rates for over 90 countries, slated to take effect next week, marking the highest US tariffs since the 1930s, a move widely believed to have worsened the Great Depression.

The weakened pound’s effect keeps gold prices steady in GBP terms just below £2,500 per ounce despite the dollar strength.

Looking Forward: What We Anticipate Next Week

Markets are grappling with the aftermath of the July U.S. jobs report, which significantly missed expectations and triggered volatility across equities and bond markets.

President Trump’s abrupt firing of Bureau of Labor Statistics Commissioner Erika McEntarfer has further stirred investor anxieties about economic data integrity.

Meanwhile, the Q2 earnings season continues, albeit at a slower pace, with roughly 29 S&P 500 companies reporting.

Palantir, AMD, Disney, McDonald’s, Caterpillar, and Eli Lilly are among the high-profile names on the docket. In macroeconomic data, services PMIs from China and central bank decisions from the UK, India, and Canada will provide additional insight into global monetary trends.

Monday 4th August

Earnings Reports:

• Palantir Technologies (PLTR)

• ON Semiconductor (ON)

Market Focus:

Palantir’s Q2 report will be in focus, with investors monitoring revenue guidance ($934M–$938M) and profitability metrics after strong prior growth, especially in U.S. commercial and government segments.

Tuesday 5th August

Earnings Reports:

• AMD (Advanced Micro Devices)

• Caterpillar (CAT)

• Pfizer (PFE)

• Apollo Global Management (APO)

• Yum! Brands (YUM)

• Uber

• Amgen

Economic Data:

• China Caixin Services PMI (Jul): Forecast 50.9, Previous 51.3

Indicates health in China’s services sector and influences global risk sentiment.

Market Focus:

• AMD and Caterpillar’s results will show industrial and tech performance amid fragile macro conditions.

• Chinese Services PMI may affect commodity markets and China-exposed equities.

Wednesday 6th August

Earnings Reports:

• McDonald’s (MCD)

• Walt Disney (DIS)

• Shopify (SHOP)

• DoorDash (DASH)

Market Focus:

• Disney earnings will shed light on theme park operations, streaming performance, and recovery in entertainment.

Potential volatility around discretionary consumer and ad-spending trends.

Thursday 7th August

Earnings Reports:

• Eli Lilly (LLY)

• ConocoPhillips (COP)

• Block (Ticker assumed: SQ or XYZ placeholder)

• Take-Two Interactive (TTWO)

Economic Data:

• Chinese Exports YoY (Jul): Forecast 5.1%, Previous 5.8%

• Reserve Bank of India (RBI) Rate Decision: Forecast 5.5%

• Bank of England Interest Rate Decision: Forecast 4.0%, down from previous 4.25%

All these could impact global risk sentiment, currency markets, and policy expectations.

Market Focus:

Markets will analyse export data from China for tariff effects, especially from U.S. policy shifts.

UK and India interest rate decisions are key for global bond and forex markets.

Friday 8 August

Economic Data:

• Canada Unemployment Rate (Jul): Forecast 6.9%, matching previous

• Labor data signals wage pressure and household strength in the Canadian economy.

Market Focus:

Reflection on the week’s jobs data and earnings to assess economic momentum heading into fall.

ICYMI

• Kamchatka Peninsula Earthquake: A massive M8.8 earthquake struck off Russia’s Kamchatka Peninsula, prompting tsunami alerts across the Pacific coast in multiple countries. Reports are still coming in regarding damage and casualties.

• Gaza & Palestine Recognition: At the New York Peace Conference on Gaza, several countries, including the UK, Canada, Malta, and San Marino, announced plans to recognise Palestine as an independent country. The UK’s recognition is conditional on a Gaza ceasefire by September.

• Cambodia–Thailand Border Conflict: Escalating conflict has led to artillery exchanges, more than 150,000 people displaced, and both sides suffering casualties. Cambodia’s airspace was partially closed.

Other Important Stories

• Syria–Turkey–Qatar Pipeline Deal: Turkey announced it will supply natural gas to Syria via the Arab Gas Pipeline, with Qatar financing part of the project.

• Internet Censorship Moves: Australia announced a ban on YouTube for teenagers starting in December, citing online harms, while Russia blocked Speedtest for alleged security threats.

• Iran Courthouse Attack: In Zahedan, Iran, at least nine people died, including three attackers and a child, in a mass shooting and grenade assault attributed to the Sunni militant group Jaysh al-Adl.

• Russian Drone/Missile Strikes on Dnipro, Ukraine: At least three people were killed, multiple residential buildings damaged.

Regional and Odd News

• Vietnam Flash Floods: Floods and landslides in Dien Bien Province left at least eight dead, with more missing.

• Wildfires in Canada: Over 700 wildfires are producing haze and air quality alerts in the Midwest U.S.

• Inland Tsunami in Washington State: Rare tsunamis rocked Lake Roosevelt, with field reports covering the unusual phenomenon.

• Spokane Residents Protest Development: Opposition has emerged in Glenrose, Spokane, against high-density housing plans.

• Salmon Fishing Ban: The Upper Columbia region faces a closure for salmon fishing due to environmental concerns.

Cultural & Human Interest

• Pope Leo Addresses Youth: During the Jubilee of Youth, Pope Leo told 1 million Catholic youths worldwide they are a sign “a different world is possible,” remembering war-affected youth unable to attend.

• Uzbekistan Travel Spotlight: Surkhandarya in Uzbekistan is being promoted as an untouched tourist destination.

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