Issue #27 - Markets on Edge: Rate Cuts, Klarna’s Surge & Oracle’s AI Ambition

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What’s in this issue;

This week’s issue comes at a turning point for global markets. Investors are watching closely as the Federal Reserve and Bank of England weigh rate decisions against a backdrop of stubborn inflation and fragile growth.

At the same time, corporate news is dominating headlines Oracle’s bold cloud forecast draws comparisons to Nvidia’s AI boom, Klarna’s $17B IPO signals fintech momentum, and Robinhood is pushing deeper into social trading.

With inflation expectations still elevated, tariffs reshaping trade flows, and FedEx, FactSet, and General Mills set to report, the coming days will test whether rate cuts can steady sentiment or if growth fears keep markets on edge.

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Weekly Movement - Heatmaps

US: Markets Await Fed Decision Amid Growth Concerns

US stocks ended mixed on Friday as investors looked ahead to this week’s Federal Reserve meeting, where a 25-basis-point rate cut is widely expected. The Dow slipped 0.6% while the Nasdaq rose 0.4%, showing just how divided sentiment remains. Weak consumer sentiment data highlighted growing concerns over inflation and tariffs, with the University of Michigan index falling to its lowest since May.

For investors, the message is clear: while lower interest rates should support borrowing and spending, the underlying weakness in consumer confidence means growth risks are still on the table. The divergence across sectors—tech names like Nvidia, Adobe, and Microsoft climbing while consumer-facing stocks like Netflix and Gap fell—shows how selective the market is becoming.

UK: Flat GDP Raises Questions Over Growth Outlook

London stocks also slipped into the red, with the FTSE 100 down 0.15% and the FTSE 250 off 0.32%, as July GDP data showed the UK economy flatlined. Services and construction held up, but a sharp fall in production highlighted how fragile the growth picture is. Sterling weakened slightly against both the dollar and the euro, while investors balanced softer economic momentum with expectations that the Bank of England will hold rates steady at its next meeting.

For UK investors, this means the domestic growth outlook remains uncertain, especially with inflation pressures persisting and fiscal policy in focus ahead of the November budget. On the corporate front, miners gained on surging copper prices, insurers rose on upgrades, but Ocado slumped nearly 20% after US partner Kroger signalled a shift in strategy—reminding investors that stock-specific risks can outweigh broader market moves.

What is Moving the Markets This Week

Oracle’s Bold Cloud Bet Echoes Nvidia’s Surge

Oracle has stunned markets with an extremely bullish forecast for its cloud infrastructure business, drawing comparisons to Nvidia’s meteoric rise in the data center space; analysts warn that if Oracle’s projections prove accurate, it could become a transformative player in cloud computing, replicating Nvidia’s role as the backbone for AI and next-gen workloads, though risks remain around execution and industry competition.

Klarna Shares Surge in Landmark NYSE Debut, Valued Over $17 Billion

Swedish fintech Klarna soared in its much-anticipated US IPO, opening at $52 per share and closing its first day at $45.82—up 15% on the NYSE—after pricing sharply above expectations at $40 per share and raising $1.37 billion for the company and its investors.

The blockbuster listing gives Klarna a market valuation of about $17.3 billion and marks one of 2025’s most closely watched technology IPOs, demonstrating strong investor appetite and highlighting Klarna’s expanding footprint in banking and buy-now-pay-later services as it tests market enthusiasm for its business trajectory.

Robinhood Launches “Robinhood Social” to Take on Reddit’s WallStreetBets with Verified Trade Sharing

Robinhood Markets is launching a new in-app social networking platform called Robinhood Social, aimed at retail investors. The platform will allow users to share and follow live trades, post investment insights, and celebrate trading wins within a verified ecosystem where every post must link to a real trade.

This feature will differentiate Robinhood from platforms like Reddit’s WallStreetBets and Twitter/X by offering transparency, as trades posted are backed by actual brokerage transactions. Users will also be able to see detailed performance statistics of other traders, including profit and loss figures. Public trades by hedge funds, politicians, and high-profile investors will be prominently showcased, bringing more transparency to retail trading communities.

Robinhood plans to launch a beta for about 10,000 users in early 2026, with a wider rollout to follow. This move comes as Robinhood aims to evolve beyond trading, becoming a financial super-app that combines investing with community and conversation, while also reducing misinformation that has proliferated on external social platforms.

The new platform taps into Robinhood’s history with the 2021 meme stock craze, seeking to keep such energy contained in its own verified environment for a more engaging and credible retail investing experience.

Top Economic News This Week

Mexico Targets Chinese Cars With Sharp Tariff Hike

Mexico plans to increase tariffs on cars imported from China and other nations without free trade deals to 50%, up from the current 20%, as part of a broader overhaul of import levies meant to protect domestic manufacturing jobs and respond to US pressure over Chinese trade practices. The wide-ranging measure, which also affects imports such as steel, toys, motorcycles, and textiles, aims to shield roughly 325,000 jobs and covers 8.6% of all imports, with approval still needed from Congress where the government holds a majority.

Inflation: A Common Thread for Both Economies

Inflation is proving to be the defining challenge in both the US and UK, with expectations for the next five years now climbing to 3.9% and 3.8% respectively—levels not seen in years. For the Federal Reserve, this creates a delicate balancing act: while weak growth data and softening labour markets argue for rate cuts, the persistence of inflation means they cannot ease policy too aggressively without risking a further loss of credibility.

Similarly, the Bank of England faces pressure from a stalling economy and flat GDP growth in July, yet households are signalling little confidence that price pressures will cool anytime soon. Both central banks are, therefore, navigating a narrow path—trying to support growth without allowing inflation to become entrenched.

For investors, this dynamic translates into heightened market volatility and more pronounced sector rotation. Rate-sensitive areas like technology, housing, and growth stocks may continue to benefit from the near-term prospect of lower borrowing costs, but the backdrop of sticky inflation suggests that gains could be uneven and fragile.

Defensive plays such as consumer staples, healthcare, and utilities remain attractive for those seeking resilience against price shocks, while commodities like copper and energy could see renewed interest as hedges. In essence, with inflation expectations staying elevated, portfolios need to remain flexible—balancing cyclical opportunities from monetary easing with the structural reality that inflation may not retreat as quickly as policymakers or markets would like.

Things I’m Paying Attention To

Is Apple Like Intel Right Now?

Apple today mirrors some challenges Intel faces, notably in catching up in fast-evolving areas like AI innovation. Intel, once the undisputed leader in chipmaking, has struggled to maintain dominance as AI-focused hardware accelerators from competitors and cloud providers reshape the space.

Apple, despite being a tech giant, is forging its own path by tightly integrating its proprietary silicon with software and hardware, creating a premium ecosystem that Intel’s volume-driven model can’t easily match. However, Apple risks a similar fate if it does not aggressively invest and innovate in AI capabilities, where the pace of change is relentless and demands specialised hardware and software expertise.

The idea of OpenAI acquiring Apple to turbocharge innovation is fascinating but unlikely, given the scale and complexity of Apple’s business model. Instead, the future likely lies in strategic partnerships where AI pioneers and hardware leaders collaborate to push boundaries.

Apple’s strength is its ecosystem, while OpenAI’s is cutting-edge AI research; together, they could redefine user experiences. For investors and market watchers, the lesson is clear: being a giant like Intel or Apple is no guarantee of leading tomorrow’s tech unless innovation keeps pace with emerging trends such as AI.

This dynamic is crucial to monitor as it will shape the next decade of technology and market leadership.

Hot Take 🔥

Google x Hubspot

Google’s parent company Alphabet has officially abandoned its plans to acquire the CRM and marketing software firm HubSpot, a potential deal that would have been Google’s biggest acquisition to date.

The discussions, which began with much anticipation in early 2024, failed to move beyond preliminary talks and due diligence was never fully conducted. The collapse of the deal caused HubSpot’s stock to drop significantly, reflecting market disappointment.

Had it gone through, the acquisition would have strengthened Google Cloud’s position by providing a competitive foothold in the CRM market against incumbents like Microsoft and Salesforce, particularly benefitting Google’s marketing and customer management capabilities.

The reasons for the deal falling apart appear to include regulatory concerns amid mounting antitrust scrutiny of big tech, doubts about Google’s ability to execute enterprise-focused strategies effectively, and concerns among HubSpot’s customer base about potential privacy, pricing, and platform changes under Google ownership.

Despite the setback, Alphabet continues to pursue growth through other acquisitions, shifting focus to cybersecurity startup Wiz. The aborted Google-HubSpot deal highlights the challenging environment for large tech mergers, where regulatory hurdles and market skepticism weigh heavily on strategic moves.

Looking Forward: What We Anticipate Next Week

Tuesday

• UK Unemployment Rate: Forecast 4.7%, Previous 4.7%

• Why it matters: Any rise would strengthen the case for more aggressive rate cuts.

• Canada Inflation Rate YoY (Aug): Forecast 1.8%, Previous 1.7%

• Why it matters: With inflation below 2%, only a sharp jump would prompt central bank action.

• US Retail Sales YoY: Forecast 3.2%, Previous 3.9%

• Why it matters: A slowdown would confirm signs of a weakening economy.

Wednesday

• US FOMC Interest Rate Decision: Forecast 4.25%, Previous 4.5%

• Why it matters: Markets see a 92% chance of a 0.25% cut, but the bigger focus will be on guidance for potential October and December cuts.

Thursday

• UK BOE Rate Decision: Forecast 4%, Previous 4%

• Why it matters: Inflation has risen steadily over the past year, but policymakers are expected to keep rates unchanged.

Friday

• UK Retail Sales YoY (Aug): Forecast 1.5%, Previous 1.1%

• Why it matters: This would be the third consecutive monthly rise, boosting growth but adding to inflationary pressures.

Earnings

• FedEx, Factset, KB Home, and General Mills report this week

• Why it matters: While only a few large firms are reporting, small-cap earnings could provide insights into broader economic resilience.

ICYMI

Specific Stock Moves Linked to Macro

- Fresnillo, a major gold and silver miner, surged 18.5% as bullion prices approached record highs driven by safe-haven demand amid markets' uncertainty and tariffs.

- Babcock International shares gained 7.4% after the UK secured a £10bn Norway warship deal, boosting confidence in defense sector growth and order books.

Geopolitical and Trade Influences

- US President Trump signaled possible tariffs on Indian and Chinese imports of Russian crude if the EU joins, underscoring geopolitical tensions impacting commodities and markets.

- US-China trade data suggest a shift in supply chains away from Southeast Asia towards India, Mexico, and Eastern Europe, influencing logistics and automation sectors and affecting margins in traditional supplier regions.

UK and European Market Sentiment

- Political instability in France following the PM's resignation on budget failures adds regional uncertainty but with modest market reaction so far.

- UK property market shows stability with steady demand and stable prices, supporting balanced investor confidence.

Broader Themes Impacting Market Psychology

- AI-related layoffs in big tech reflect shifting labor and profit strategies, impacting sector sentiment. The UK faces challenges in scaling AI infrastructure due to energy and planning constraints, possibly affecting tech investment.

- European startups struggle with storytelling compared to US peers, signaling potential growth narrative weaknesses that could influence investment appetite in tech sectors.

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Please remember this is not investment advice—I'm simply sharing my personal opinions and research. Always conduct your own due diligence before making any investment decisions.