Inflation Pushes Oracle Off the Front Page

The surge in Oracle's share price in New York yesterday failed to rekindle broader optimism on Wall Street, where investors are treading cautiously ahead of the imminent release of US inflation data for August. This figure represents the final hurdle before the widely anticipated interest rate cut by the Federal Reserve next week. In Europe, the ECB is expected to maintain its current monetary policy stance following today's meeting. These are the two key events investors are watching most closely today.

Against all expectations, Oracle's spectacular rally failed to inject momentum into the wider US market. The broad-based S&P 500 edged up just 0.3%, the Nasdaq 100 ticked up by a mere 0.04%, and the Dow Jones slipped 0.48%, dragged down by weakness across the tech sector, with the notable exception of Nvidia. Oracle (which is not part of either the Dow Jones or the Nasdaq 100) closed 36% higher—an astonishing leap that perfectly encapsulates the current market FOMO for stocks tied to the artificial intelligence narrative.

 

FOMO—the fear of missing out—is the behavioural impulse that drives herd-like buying in financial markets. It is often mocked, but it has proven far more lucrative for investors than the doom merchants who generate clicks but rarely spark rallies. For months, FOMO has dictated full exposure to AI. And it has paid off handsomely. When it extends to major companies, the result can be a heady cocktail of upward momentum fuelled by tens—or even hundreds—of billions of dollars.

 

And indeed, hundreds it was yesterday. A brief recap for those lagging behind: on Tuesday evening, after the US market closed, Oracle—long pigeonholed as a legacy IT player—not only confirmed its AI exposure but revealed it to be both substantial and accelerating, backed by colossal order volumes. The market had significantly underestimated Oracle’s potential. At least partially, because otherwise its shares would not have soared 36% in a single session, boosting the company’s market capitalisation from $680 billion to $922 billion in just 24 hours—a staggering $242 billion increase, nearly equivalent to the entire market cap of L’Oréal or Novartis (currently the 8th and 7th largest listed companies in Europe, respectively).

 

It is a jaw-dropping development that even propelled Oracle chairman Larry Ellison ahead of Elon Musk (Tesla) in the ranking of the world’s ultra-wealthy—though in truth they are neck and neck, as the actual valuation of such fortunes remains elusive.

 

Yet the rest of the US tech sector failed to follow suit. AI aside, most tech stocks slumped, notably Apple, which shed 3% after unveiling a batch of underwhelming, AI-free product updates. The most buzz the tech press could muster was over a new iPhone colour rather than its substantive features. It's something of a September effect: the lull before the year-end sprint, as investors reassess their positions. In Europe, most indices drifted lower yesterday, with the exception of the CAC 40, which gained 0.15% for reasons that continue to baffle the rational.

 

Impressive though the Oracle episode may be, all eyes now turn to the US inflation figures at 14:30 CET. This is the last data point with the potential to challenge the market consensus on a Fed rate cut next week—though it would likely take a significantly higher-than-expected reading to do so. The market is leaning the other way: what if, like yesterday's producer price index, the consumer price index comes in lower than feared? That would reignite speculation about a deeper-than-expected rate cut. As it stands, traders assign a 92% probability to a 25-basis-point cut, and 8% to a 50-point move. Consensus forecasts point to annual inflation of 2.9% and core inflation at 3.1%.

 

Just before the US inflation print, the ECB will announce its interest rate decision at 14:15 CET. Economists expect no change, with the deposit rate remaining at 2% and the refinancing rate at 2.15%. The central bank will also release its latest macroeconomic projections.

 

In Asia-Pacific this morning, sentiment remains positive in Japan (+0.6%), mainland China, and Taiwan. Gains are more tentative in South Korea and India, while Hong Kong and Australia are posting modest declines. A sense of caution prevails ahead of the US inflation data, which could prove decisive for near-term market direction. European futures are pointing to a slightly lower open.

On today's agenda: the ECB's deposit facility rate, refinancing rate, and marginal lending facility will be announced in the eurozone; in the United States, the CPI GM, new unemployment claims, and the federal budget balance will be released. See the full calendar here.

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In corporate news:

• Valentino will not change hands before at least 2028, says Kering.
• Stellantis sells its Italian diesel engine manufacturing business VM Motori.
• Carrefour acquires a stake in Hmarket, a retailer specialising in halal food.
• Eiffage and NGE win a €132 million contract in France as a consortium.
• Siemens Healthineers has reportedly begun talks to sell its diagnostics unit for more than €6 billion, according to Bloomberg.
• EDP Renovaveis has completed the sale of 121 MW of wind farms in France and Belgium for €200 million.
• The GTCR fund is set to buy Czech generic drug maker Zentiva from Advent for €4.1 billion, according to the FT.
• OpenAI is set to purchase computing power from Oracle under a $300 billion contract, according to the WSJ.
• Merck & Co is abandoning its R&D activities in the UK, according to the FT.
• JPMorgan and Fifth Third face losses related to troubled subprime auto lender.
• Barrick Mining sells Canadian Hemlo mine for up to $1.1 billion.
• Eunice Kim, Chief Product Officer at Netflix, steps down.
• United Parcel Service and American Express collaborate.
• Klarna surges on its first day of trading in New York.
• Newmont Corporation delists from the Toronto Stock Exchange.
• Adani Power receives letter of intent for 800 MW power project.
• Elliott confirms stake in The Kansai Electric Power Company.

See more news from UK listed companies here

Analyst Recommendations:

• Diploma Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 5750 to GBX 6350.
• Halma Plc: Berenberg maintains its buy recommendation and raises the target price from GBX 3250 to GBX 3750.
• Hilton Food Group Plc: Berenberg maintains its buy recommendation and reduces the target price from GBX 1120 to GBX 1100.
• Anglo American Plc: DZ Bank AG Research downgrades to hold from buy with a target price of GBP 25.
• Tate & Lyle Plc: BNP Paribas Exane initiates an outperform recommendation with a target price of USD 40.90.
• Compass Group Plc: Barclays maintains its overweight recommendation and raises the target price from GBP 30 to GBP 31.55.
• Serco Group Plc: Jefferies maintains its hold recommendation and raises the target price from GBX 175 to GBX 230.
• British American Tobacco P.l.c.: Goldman Sachs maintains its neutral recommendation and raises the target price from GBX 3250 to GBX 4500.
• Associated British Foods Plc: BNP Paribas Exane maintains its neutral recommendation and reduces the target price from GBX 2300 to GBX 2100.
• Asml Holding N.v.: Baptista Research downgrades to hold from outperform and reduces the target price from USD 856.40 to USD 824.70.
• De'longhi S.p.a.: BNP Paribas Exane upgrades to outperform from neutral with a price target raised from EUR 32 to EUR 38.
• Dsm-Firmenich : BNP Paribas Exane maintains its outperform recommendation and reduces the target price from EUR 126 to EUR 119.
• Symrise Ag: BNP Paribas Exane maintains its outperform recommendation and reduces the target price from EUR 122 to EUR 115.
• Sanofi: Oddo BHF maintains its outperform recommendation and reduces the target price from EUR 116 to EUR 110.