The relative stability of the DAX suggests that investors have not yet abandoned hopes of an easing in energy markets and, in turn, some relief in bond markets. This view was supported by weaker ADP employment data in the afternoon. The continued cooling of the US labour market gives the Federal Reserve more room to wait and could potentially prevent it from raising interest rates in two weeks’ time.
Nervousness across financial markets is nevertheless increasing ahead of the upcoming monetary policy decisions. Developments in energy markets are playing an increasingly important role. The higher oil prices rise, the greater the inflationary pressure and the stronger the case for central banks to respond. In Europe, the European Central Bank has already signalled another rate hike in September as it seeks to counter renewed upward pressure on prices.
Later today, the spotlight turns to Broadcom. Alongside Nvidia, the semiconductor heavyweight has become one of the most important bellwethers for assessing how broadly the AI infrastructure boom is spreading across the chip industry. Expectations for both the results and the outlook are correspondingly high.
Broadcom itself had guided for total third-quarter revenue of around $29bn. More important, however, will be its AI semiconductor business, where revenue is expected to rise to around $16bn in the third quarter, representing growth of more than 200% year-on-year. The key question will therefore be whether Broadcom’s management can convince investors that these exceptionally high growth rates are sustainable and provide further evidence that the AI infrastructure investment cycle still has plenty of momentum left.
