Issue #25 - Markets Weaken on Inflation Worries | Intel, Nvidia & Fed in Focus

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What’s in this issue;

This week’s issue dives into global equity moves as stubborn inflation and weak sentiment pressured U.S., U.K., and European markets.

We break down the latest Fed signals, tariff-driven inflation dynamics, and why gold surged to record highs amid political uncertainty.

Big tech takes centre stage with Nvidia’s strong Q2 earnings, Intel’s warning on U.S. government ownership, and Apple’s evolving AI strategy.

We also cover Norway’s sovereign wealth fund divestment, global inflation trends, and what next week’s Eurozone CPI, U.S. jobs data, and major earnings from Salesforce and Broadcom mean for rates, currencies, and market positioning.

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Weekly Movement - Heatmaps

United States – Inflation Pressures and Weak Sentiment Drag Markets Lower

US markets ended lower on Friday as investors digested higher inflation data and signs of economic pressure.

The Dow Jones slipped 0.20% to 45,544.88, the S&P 500 fell 0.64% to 6,460.26, and the Nasdaq declined 1.15% to 21,455.55. Sentiment was weighed down by July’s personal consumption expenditures (PCE) report, the Fed’s preferred inflation gauge, which showed core inflation rising to 2.9%—the highest since February—while headline inflation reached 2.6%.

Strong income and spending growth (+0.4% and +0.5% respectively) were offset by weakening consumer confidence, with the University of Michigan’s sentiment index dropping to 58.2. Inflation expectations also ticked higher, and the Chicago Business Barometer plunged to 41.5, its weakest reading in nearly a year, signalling a sharp manufacturing slowdown. Meanwhile, the trade deficit widened to $103.6bn as importers rushed to beat tariff deadlines.

United Kingdom – Banking Stocks Hit as Windfall Tax Talk Weighs on FTSE

London stocks closed lower on Friday, dragged by a sharp sell-off in banking shares following a think tank’s call for a windfall tax to plug fiscal gaps.

The FTSE 100 slipped 0.32% to 9,187.34, while the FTSE 250 lost 0.64% at 21,605.72. NatWest, Lloyds, and Barclays led the declines, with concerns that higher taxes could squeeze lending and slow growth. Despite this, business sentiment remained relatively strong: Lloyds’ Business Barometer rose to 54%, its highest since 2014, signalling robust trading prospects for firms.

However, broader economic optimism dipped, reflecting persistent inflation and policy uncertainty. Sterling edged slightly lower, down 0.04% against the dollar and 0.21% versus the euro. Among movers, Rolls-Royce gained after Citi raised its price target, and JTC surged nearly 18% after rejecting two takeover bids from private equity firm Permira.

Europe – Inflation Surprises and Weak Data Drive Stocks Lower

European equities fell to their lowest in nearly two weeks as inflation concerns weighed on sentiment. The Stoxx 600 dropped 0.6% to 550.62, with all major regional indices finishing in the red. German inflation surprised to the upside, rising to 2.2% in July, while Spanish inflation stayed elevated at 2.7%.

French inflation cooled slightly to 0.9%, though political instability in France offset any positive impact. Weak retail sales in Germany—down 1.5% in July, the steepest decline in a year—added to the bearish tone, while unemployment remained at 6.3%, its highest in four years.

Luxury goods maker Rémy Cointreau slid despite cutting its expected tariff-related losses following a US-EU trade deal, and Pernod Ricard also declined. Overall, profit-taking and signs of sticky inflation both domestically and in the US set a cautious tone heading into the weekend.

What is Moving the Markets This Week

Intel Warns US Government’s 10% Stake May Hurt International Sales and Shareholder Interests

Intel has warned that the U.S. government’s approximately 10% equity stake, acquired through converting $11 billion in CHIPS Act grants under an agreement with the Trump administration, could negatively impact its international sales—especially in markets like China where nearly a third of its 2024 revenue came from—and limit its ability to secure future government funding.

This shareholder position also dilutes existing investors’ voting power and may restrict Intel’s flexibility in pursuing transactions beneficial to shareholders. The company faces potential regulatory hurdles and adverse reactions from investors, suppliers, competitors, employees, and foreign governments wary of increased U.S. government involvement.

While the investment provides important financial support for Intel’s ambitious domestic expansion, it raises concerns about how government ownership might affect market dynamics, investor confidence, and Intel’s global competitiveness amid geopolitical tensions.

Trump’s Fed Moves and Tariffs Drive Gold to Record Highs

Gold prices have surged near record highs in 2025, fuelled by President Trump’s aggressive actions to reshape the Federal Reserve and his imposition of sweeping tariffs, which have heightened global economic uncertainty and investor unease.

Trump’s controversial removal of Fed Governor Lisa Cook threatens the Fed’s independence, spurring fears of politically driven monetary policy and increased inflation, prompting investors to seek gold as a safe-haven asset.

Concurrently, ongoing tariff escalations and trade tensions are exacerbating worries about slower global growth and inflation risks, further boosting gold demand.

This convergence of political instability, inflationary pressures, and weakening confidence in traditional financial assets has led to a significant rally in gold, as investors flock to it for security amid growing market volatility and dollar weakness.

Nvidia Q2 2025 Earnings Highlight AI Leadership Amid Challenges

Nvidia reported a strong second-quarter performance in 2025, delivering $46.7 billion in revenue—an impressive 56% year-over-year increase and beating analyst expectations.

Earnings per share came in at $1.05, exceeding forecasts, driven primarily by growth in the data center segment and the successful launch of the Blackwell AI platform. Despite these strong results, Nvidia’s shares dipped slightly after hours due to data centre sales falling just short of forecasts and ongoing uncertainties around shipments of H20 chips to China, mainly due to U.S. export restrictions and geopolitical tensions.

CEO Jensen Huang emphasised the significance of China as a critical AI market, noting potential sales worth billions if restrictions ease. The company projects continued robust growth into the third quarter with an anticipated $54 billion in revenue, underscoring Nvidia’s pivotal role in powering the expanding global AI infrastructure, even as short-term challenges temper investor enthusiasm.

Overall, Nvidia’s earnings reinforce its dominance in AI chip technology while highlighting geopolitical factors shaping its market trajectory.

Norway’s Wealth Fund Exits Israeli Companies on Ethical and Market Concerns

Norway’s sovereign wealth fund, the world’s largest valued at around $2 trillion, has recently divested from six Israeli companies amid rising domestic and international political pressure related to the conflict in Palestinian territories.

This move follows an earlier divestment from 11 Israeli firms, as the fund re-evaluates its investments due to ethical concerns about companies involved in activities connected to the West Bank and Gaza. The fund’s CEO described the situation as a “crisis,” acknowledging the worsening humanitarian crisis and the need to strengthen due diligence efforts.

While balancing its financial returns and political sensitivities, especially with the US, the fund aims to maintain ethical investment standards by excluding companies it views as complicit in human rights violations, such as those supporting military operations.

This divestment is both a market-driven response to geopolitical risks and a reflection of Norway’s commitment to ethical investment principles amid election debates and global scrutiny.

Top Economic News This Week

US Economic Data Focus: Key data releases this week include the second estimate of US Q2 GDP, Core PCE inflation, and consumer confidence. Early Q2 GDP showed 3% growth but was largely driven by trade, with consumer and business spending slowing to the weakest pace in over two years. Core PCE inflation, the Fed’s preferred inflation gauge, remains slightly elevated at 2.8% year-over-year. Consumer confidence data will reveal spending willingness amid these inflationary pressures. Markets are watching closely to gauge if the Fed will move toward rate cuts or maintain tight policy due to sticky inflation. The overall theme is balancing growth, inflation, and consumer health to understand the Fed’s next moves .

US Inflation and Tariffs: US inflation remains a concern as core CPI inflation accelerated to 3.1% with producer price inflation at a multi-year high of 3.3%. This inflation pressure is largely attributed to companies passing on increased costs related to tariffs to consumers. How retailers handle these cost pressures—whether absorbing them or passing them fully to households—will influence if inflation is temporary or more entrenched. These dynamics are important ahead of the September Federal Open Market Committee meeting, tempering optimism on imminent rate cuts.

Global Economic Outlook: The IMF’s July 2025 World Economic Outlook projects global growth at 3.0% for 2025 and 3.1% in 2026, a slight upward revision reflecting tariff front-loading and fiscal expansion in some regions. However, elevated geopolitical risks and tariff uncertainties remain downside risks. Inflation is expected to decline globally but stay above target in the US, underscoring the persistent uncertainty and need for careful policy calibration to maintain resilience.

Any Target Updates (Companies I’m Watching)

Apple in Focus

Apple considering acquisitions in the AI sector, specifically involving the companies Perplexity and Mistral AI.

Here is a breakdown of the key points:

Apple is continuing its strategy of focusing on smaller AI deals, despite public comments from CEO Tim Cook expressing openness to mergers and acquisitions (M&A) that could accelerate Apple’s AI development roadmap.

Perplexity (known for AI search leveraging models like OpenAI’s) and Mistral AI (a French AI firm with its own models and system development expertise) remain candidates under internal discussion for acquisition.

Eddy Cue, a senior Apple executive, is reportedly the strongest advocate within Apple for making significant AI acquisitions. He has previously pushed for big deals for companies like Netflix and Tesla, although those were reportedly blocked by Tim Cook.

Craig Federighi, another key Apple executive, is more cautious about large AI acquisitions. He believes Apple’s internal teams can advance Apple’s AI capabilities without buying out other companies. Apple’s acquisition culture is wary of overpaying, and the company’s acquisition process is meticulous and measured.

A notable context is that Apple’s deal with Google for search is uncertain due to an upcoming court case, increasing the urgency of internal AI strategy decisions. Separately, Apple is reportedly running a competition between its in-house AI team and various third-party AI model providers, including Anthropic, OpenAI, and Google, to build the next version of Siri.

Apple is balancing caution and ambitions in AI acquisitions, with internal debates especially between Eddy Cue’s pro-acquisition stance and Federighi’s emphasis on in-house development, while considering deals with companies like Perplexity and Mistral AI as part of their evolving AI strategy

Apple is exploring a partnership with Google to use Google’s Gemini AI to power a revamped version of its Siri voice assistant. Apple is reportedly testing two versions of the upgrade: one driven by its own internal AI models, and another using external AI providers like Google’s Gemini. This exploration signals Apple’s growing openness to external AI collaborations, driven by internal challenges and delays with its own AI team.

The Siri revamp, initially managed by Apple’s internal Foundation Models team, faced engineering obstacles and setbacks, including key personnel departures. As a result, Apple is considering outside help, including Google’s Gemini AI, Anthropic, and OpenAI technologies, to deliver a more conversational and intelligent Siri experience. The updated Siri was previewed at Apple’s 2024 WWDC with plans for a more powerful launch pushed into 2026.

Two versions of the new Siri are codenamed Linwood (Apple’s internal AI) and Glenwood (external AI-powered), with Apple testing them to decide which provides smarter, more personalised responses. This shift also reflects broader trends in AI where major companies increasingly rely on partnerships for advanced AI capabilities.

Executives such as software head Craig Federighi and Vision Pro lead Mike Rockwell are overseeing this Siri revamp. The move to explore Gemini AI marks a notable development in Apple’s AI strategy amid market and engineering dynamics. Apple’s stock showed some positive movement around this news, though the company’s outlook remains influenced by competitive pressures and AI innovation battles.

Apple is actively considering powering the next generation of Siri with Google’s Gemini AI as part of a strategic rethink and external collaboration in AI to overcome internal challenges and speed innovation, aiming for a more intelligent voice assistant rollout by 2026 .

Looking Forward: What We Anticipate Next Week

Tuesday

Eurozone Inflation (YoY, Flash)

• Forecast: 2.1% (Previous 2%)

• Why it matters: A slight uptick keeps pressure on the ECB and may delay rate cuts.

Wednesday

Australia GDP (YoY)

• Forecast: 2.1% (Previous 1.3%)

• Why it matters: A rebound strengthens the case against near-term RBA easing, potentially supporting the Australian dollar.

US JOLTs Job Openings

• Forecast: 7.3m (Previous 7.44m)

• Why it matters: Cooling job openings point to softer labor demand in the US, highlighting a weakening jobs market.

Friday

Canada Unemployment Rate

• Previous: 6.9%

• Why it matters: Elevated unemployment could increase pressure on the Bank of Canada to consider rate cuts.

US Nonfarm Payrolls

• Forecast: 50k (Previous 73k)

• Why it matters: Ongoing hiring slowdown reinforces signals that the US labor market is losing momentum.

US Unemployment Rate

• Forecast: 4.2% (Previous 4.2%)

• Why it matters: A steady headline rate masks underground weakness, keeping the Fed cautious.

Earnings Spotlight

• Salesforce

• Broadcom

• Copart

• Kroger

• Zscaler

• Figma

Market Implications Summary

Rates and Central Banks: A firmer Eurozone inflation outcome may delay ECB rate cuts, while softer US jobs data could strengthen the case for the Fed to ease later this year.

Currencies: The Australian dollar may find support from stronger growth data, while the US dollar could soften if payrolls confirm weaker momentum. The Canadian dollar remains vulnerable to labor market deterioration.

Equities: Tech and software earnings, particularly from Salesforce, Broadcom, Zscaler, and Figma, will drive sentiment in growth stocks against a backdrop of slowing US data.

Overall Tone: Stubborn inflation in Europe contrasts with labor market softness in North America, creating a mixed risk environment with higher volatility potential.

ICYMI

• A month-long legionnaires’ disease outbreak ended in London, Ontario with 70 cases and 3 deaths.

• The US raised tariffs on Indian imports to 50%, with additional tariffs due to Russian oil purchases.

• Several mass shootings occurred, including at Fort Stewart in Georgia, USA, and a nightclub in Ecuador.

• The Israeli Security Cabinet approved plans to capture Gaza City amidst the Gaza war, while Germany halted certain weapon shipments to Israel.

• Political changes included Karol Nawrocki sworn in as Poland’s president and the dismissal of an impeachment complaint against Philippines Vice President Sara Duterte.

• There were various armed conflicts and attacks including Russian offensives in Ukraine, clashes in Sudan’s Darfur region, and insurgent operations in Pakistan.

• Major disasters included a wildfire in Spain that destroyed historic sites, a factory explosion in Brazil killing 9, flash flooding in Tennessee, and a deadly cloudburst in Jammu and Kashmir, India.

• International meetings included US President Donald Trump meeting Russian President Vladimir Putin in Alaska to discuss ending the war in Ukraine.

• Other notable news included arrests of political figures in Mali and Peru, counter-terrorism successes in Puntland against ISIS, and interesting cultural stories circulating online.

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