European inflation decline overshadows US tech concerns in early trade

• European markets on the rise after inflation declines
• Nvidia slumps despite earnings beat
• Jobless claims in focus

European markets are enjoying a positive start to the day, with the likes of the DAX, FTSE 100 and CAC all posting moderate gains despite the concerns that we could see a tech-led decline for US markets later today. Nonetheless, the European focus has turned to eurozone inflation data, which has kicked off with a welcome slump in Spanish CPI. With headline inflation for Spain collapsing from 2.8% to 2.2%, we are already starting to see confidence build that tomorrows headline eurozone report could be a blockbuster event that puts additional pressure on the ECB to slash rates. While we await the German inflation figure, the early release of regional data has seen sharp monthly declines across the likes of Baden Wuerttemberg (-0.3%), North Rhine Westphalia (-0.3%), Brandenburg (-0.2%), and Saxony (-0.2%). It stands to reason that we should similarly see a substantial decline for German inflation, with the decline from 2.3% to 2.2% looking likely to be too conservative. This disinflation has helped drive the euro lower, while the DAX gradually builds back up towards its record high of 18890.

The after-hours reaction to Nvidia earnings have confounded many, with the company losing over 6% despite beating estimates across the board. Markets have a tendency to focus on the negatives when a company has seen such incredible gains, and this occasion appears to be a case of creating a negative narrative even in the absence of one. For now, the fact that the Q3 outlook is only marginally above estimates does raise some questions over whether the pace of growth will slow from here. However, if past performance is anything to go by, Nvidia will likely manage to overcome those estimates just as it did on both the top and bottom line yesterday. For investors, this dip will likely represent a potential opportunity, while the wider markets will also be able to breathe a sigh of relief that the second quarter earnings season is behind us and has largely been a success.

Looking ahead, the US jobs market comes into question once again, with all eyes fixated on the unemployment claims figure. With huge downside revisions having been announced for past payrolls figures, we have been questioning whether the positive sentiment around the US economy had been built on false data all along. Meanwhile, with the rise in US unemployment giving way to heightened concerns around a potential impending recession, today’s Q2 GDP revision should hopefully allay fears of a significant slowdown in the third quarter.