European SWOT Market
Fundamental Analysis

A Dark Tuesday for Equities as Oracle’s Shares Plummet 13%

  • Oracle’s shares plunged over 13%, driven by a pessimistic forecast.
  • Surging oil prices heightened concerns about persistent inflation pressures.
  • Traders have priced in a 50% chance of the ECB lifting rates by 25 basis points.

US equities closed with losses on Tuesday as Oracle’s shares plunged over 13%, driven by a pessimistic forecast. Moreover, surging oil prices heightened concerns about persistent inflation pressures before critical inflation reports.

Oracle’s shares plummeted to their lowest point since June. The cloud services provider projected the current-quarter revenue below expectations and narrowly missed first-quarter forecasts. and Microsoft, leading players in cloud computing, also declined by more than 1% due to Oracle’s weak outlook and increased US Treasury yields.

Oil prices surged over 1%, adding to a recent rally. This fueled concerns that stubborn inflation might lead to sustained higher US interest rates despite robust economic data.

Thomas Hayes from Great Hill Capital LLC expressed concern, stating, “People are worried about energy prices rising rapidly in recent weeks, which raises concerns for November.” Some investors fear Federal Reserve policymakers may opt to raise rates again during the November meeting. 

Moreover, Investors eagerly anticipated the release of August consumer price index data and producer prices to assess the trajectory of US interest rates before the Fed’s meeting on September 20.

Interest rate traders currently assign a 93% probability of rates remaining unchanged in September. However, there’s only a 56% likelihood of a pause at the November meeting.

Meanwhile, European equities declined, primarily due to weak guidance from US tech firm Oracle, which weighed down German software maker SAP. Investors took a cautious stance ahead of US inflation data and the European Central Bank’s rate decision later in the week. 

Money market traders gradually increased their expectations of another interest rate hike by the ECB. Currently, traders have priced in a 50% chance of the ECB raising rates by 25 basis points to 4% on Thursday.

UK unemployment rate (Source: LSEG Datastream)

UK unemployment rate (Source: LSEG Datastream)

In contrast, Britain’s FTSE 100 stood out with a 0.4% gain, supported by a weaker pound following data indicating a weakened labor market in July, despite robust wage growth. This creates uncertainty regarding the Bank of England’s interest rate decision next week.

British pay growth reached another all-time high, indicating that the Bank of England will probably raise interest rates again. However, Tuesday’s data also suggested a slowdown in the labor market.