Global markets drift as US inflation data fuels rate hike fears

The US economy grew 1.5% in the second quarter, matching estimates, while personal consumption expenditures climbed 0.2% on a monthly basis and the core PCE index — excluding food and energy — rose 0.2% month-on-month and 3.3% annually. The US Dollar Index advanced 0.2% to 99.1 on Wednesday before trading flat on Thursday, while money markets priced the likelihood of an October Federal Reserve rate hike at 62%, up from 57%, as the 10-year Treasury yield climbed to 4.66%.

Macroeconomic indicators continue to signal persistent inflationary pressures, driving risk aversion across asset classes. Concerns also mounted over the sustainability of the US Treasury's decision to double long-term bond buyback operations, with investors awaiting Warsh's remarks on Friday in Wyoming for signals on the monetary policy trajectory.

Nvidia earnings buoy technology sector

Chipmaker Nvidia reported quarterly revenue surged 106% year-on-year to $96.2 billion, while net income jumped 126% to $59.7 billion, surpassing analyst estimates. Jensen Huang, the company's founder and chief executive, said tokens used in artificial intelligence generation have become more efficient and profitable amid rising demand, renewing investor confidence in semiconductor firms.

Meta Platforms agreed to pay $18 billion to settle litigation alleging its social media platforms harmed children, with its shares closing up 1% on Wednesday. The Dow Jones Industrial Average fell 0.21%, the S&P 500 dropped 0.02%, and the Nasdaq declined 0.08% on Wednesday, though US indexes opened Thursday on a positive note.

Oil and gold prices diverge on geopolitical shifts

Expectations that the Strait of Hormuz may reopen improved the inflation outlook and risk appetite, increasing selling pressure on crude markets. Tehran said it had reached agreements with Oman regarding revenue sharing at the chokepoint, though officials stressed that reopening depends on Washington accepting Iran's conditions. President Donald Trump said Washington maintains full control over the strait and that the war with Iran would end very soon; the Qatari prime minister and foreign minister are expected to visit Tehran to ease tensions.

October-delivery Brent crude fell 0.4% to $87.5 per barrel, while reports that Russia is preparing to escalate the war in Ukraine added uncertainty to energy markets. Gold prices declined 1.4% to $4,594 per ounce on Wednesday but recovered to trade at $4,621 on Thursday, with central bank purchases supporting demand despite pressure from rising rate expectations.

European and Asian markets mixed

European equities attracted buying activity on Wednesday as declining oil prices supported sentiment, particularly among airline stocks anticipating improved balance sheets. Isabel Schnabel, an executive board member at the European Central Bank, said interest rates need to remain at higher levels, fueling expectations for a hike next month and potentially another in March. Germany's ifo Institute reported industrial export expectations rose to 9.6 points in August from minus 2.8 in July, marking the highest level since February 2022.

The Bank of Korea raised its policy rate by 25 basis points to 3% on Thursday, marking consecutive increases aimed at countering inflationary pressures from Middle East conflicts. China's industrial profits grew 11.2% in July, the slowest pace since December 2025, with Fitch Ratings noting that deflationary pressures have eased though weak domestic demand persists. Asian markets closed mixed, with South Korea's Kospi surging 1.4% as SK Hynix shares jumped 2.6% and Samsung Electronics gained 1.5%, while China's Shanghai Composite rose 0.6%, Japan's Nikkei 225 fell 0.1%, and Hong Kong's Hang Seng dropped 0.4%.