Inflation concerns return
Global markets came under pressure this week as renewed escalation in the Middle East pushed oil prices close to USD 100 per barrel and reignited inflation concerns.
Federal Reserve Chair Kevin Warsh reiterated the Fed’s commitment to bringing inflation under control, while European Central Bank (ECB) officials all but confirmed a 25-basis point rate hike at next week’s meeting. Markets currently expect the ECB Deposit Facility Rate to rise from 2.25% to 2.50%.
This week, two major technology companies reported earnings. Palo Alto Networks posted better-than-expected results, with revenue of USD 3.4 billion and earnings per share (EPS) of USD 1.02. The company also issued a strong outlook for the fiscal year 2027 (FY2027), guiding for revenue growth of 23-24%, which is above market expectations. Despite this, the share price declined as investors focused on slightly lower margins and elevated expectations.
Broadcom also reported strong results. Revenue reached USD 29.6 billion, while AI semiconductor revenue surged 221% year-on-year to USD 16.7 billion. Although the company’s short-term outlook disappointed some investors, management outlined an ambitious AI roadmap and expects AI chip revenue to reach USD 115 billion in FY2027.
Strong results were not limited to the technology sector. Medtronic stood out with 14% revenue growth, higher full-year guidance and continued momentum in its cardiovascular segment.
Looking ahead, attention will shift to inflation data and central bank decisions. The ECB meeting on Thursday is expected to result in another rate increase. In the US, producer price and consumer inflation data will provide important insights into whether higher energy prices are feeding through into broader price pressures. A stronger-than-expected inflation reading could reinforce expectations that interest rates will remain higher for longer, which could weigh on both bond and equity markets.