Global equity markets are bracing for a pivotal week as the artificial intelligence trade, which has fuelled record gains, faces intense scrutiny. The world’s largest technology companies, including Microsoft, Amazon, and Meta, the company behind Facebook and Instagram, are scheduled to release quarterly earnings. Investors will closely examine these results for evidence that enormous AI infrastructure spending is generating promised returns amid anxieties over expansion plans. These tech giants, along with Alphabet, have forecast over A$1 trillion in infrastructure spending this year, with concerns over capital discipline heightened last week after Alphabet raised its spending outlook.
Jitters across the tech sector last week coincided with a significant spike in oil prices, which briefly topped US$100 a barrel amid geopolitical tensions. Goldman Sachs has warned that persistent regional unrest could drive oil above US$120. This global volatility saw the tech-heavy Nasdaq 100 tumble 1.2 per cent on Friday. The Australian sharemarket is poised to shake off these nerves, with futures indicating a 0.6 per cent bounce for the S&P/ASX 200. Domestically, the sharp rise in oil prices is fuelling concerns about its impact on the fragile Australian consumer and an economy heavily reliant on diesel, particularly for its large mining and agriculture sectors.
Local traders are keenly anticipating Wednesday’s release of Australia’s consumer price index for the June quarter, a release BetaShares chief economist David Bassanese called “the most important economic data in months.” Economists forecast core inflation to rise by 0.9 per cent quarterly, pushing the annual pace to 3.7 per cent. A stronger-than-expected rebound in underlying inflation could compel the Reserve Bank of Australia (RBA) to raise rates at its August meeting, adding further pressure on mortgage holders. Investors will also seek RBA outlook clues from Governor Michele Bullock’s address on Tuesday and chief economist Sarah Hunter’s chat on Thursday. The US Federal Reserve will also meet this week, with markets now pricing in a 34 per cent chance of a rate hike amid the oil price surge, up from just 13 per cent a week prior.
