Josh Gilbert, lead Analyst for APAC at eToro Group Ltd (Unlisted (US):ETRO), shares his three things to watch in Australia in the coming days.
Q2 AU inflation
The RBA does not meet until August 11th, but next week could go a long way toward deciding how that meeting plays out. Governor Michele Bullock speaks on Tuesday, the Q2 inflation report lands on Wednesday, and producer prices plus an address from Assistant Governor Sarah Hunter close out the week on Friday. By the weekend, markets will have a far better sense of whether a fourth hike for the year is coming in August.
For now, at least one more hike before the end of the year looks increasingly likely, although August remains a live but finely balanced call. Markets are pricing around a 35% chance of a 25 basis point increase next month, but that number could move sharply if Wednesday's inflation report delivers another upside surprise.
Consensus expects annual headline inflation to accelerate to around 4.4% in the June quarter, up from 4.1% in Q1 and well above the RBA's 2% to 3% target band. But the figure to watch is trimmed inflation, where expectations are for 3.8%. We saw headline inflation ease to 4% in May as fuel prices came off the boil, yet trimmed inflation went the other way, hitting 3.6%, the highest since late 2024. That tells us price pressures are digging in across the economy, not just riding on the back of higher energy costs.
This week's shock jobs report, with more than 76,000 positions added against expectations of around 15,000, has already lifted rate hike expectations, and with households feeling the squeeze from three hikes this year, the prospect of a fourth will put some investors on edge.
Bullock's words will be in the limelight, and investors will be hanging on every word for a hint at how the board is leaning. The RBA made clear in June that inflation remained too high and that the pause was intended to give it more time to assess how the previous 75 basis points of tightening were flowing through the economy.
Big tech earnings
Four of the Magnificent Seven report this week, with Microsoft and Meta landing Thursday morning local time and Apple and Amazon following on Friday. Between them, they carry an enormous chunk of the S&P 500, and after Alphabet's results this week reignited fears about the sheer scale of AI spending, the stakes are high.
Microsoft has the most to prove. The stock has been the biggest drag on the S&P 500 this year after a torrid June, with investors rattled by a 2026 capex bill heading towards USD$190 billion. Azure growth is expected to land close to 40%, a number most companies would celebrate, but after Google Cloud’s latest surge, strong growth alone may not be enough. Investors want evidence that Microsoft’s spending is translating into faster revenue growth, stronger margins and meaningful returns from AI products.
Meta faces the same spending question, with this year's outlay guided at up to USD$145 billion and next year's outlay potentially far larger. That said, advertising growth is now running at its fastest pace since 2021, which may have bought Mark Zuckerberg some patience from markets. The focus will be on whether AI is continuing to improve ad targeting and monetisation quickly enough to justify the infrastructure bill.
Amazon enters earnings with the stock down around 13% since its last report, and AWS will be the key number. Growth is expected to accelerate above 31%, and if the world’s largest cloud business can show that roughly USD$200 billion of spending is converting into revenue, it could lift sentiment across the entire sector.
Apple, meanwhile, has quietly been the winner of the group, up almost 19% since its last result as investors gravitate towards the one mega-cap not writing enormous AI cheques. But rising memory costs and a looming CEO handover mean it has its own questions to answer. Any updates around the new iPhone launch will be a focal point.
By Friday afternoon, investors should know whether Big Tech’s AI spending is beginning to earn its keep, or whether August starts with the sector on the back foot.
Fed rate decision
The Federal Reserve will be in the spotlight this week, with the FOMC meeting on Tuesday and Wednesday for its latest rate decision. Rate hike expectations grew through the middle of July, before a softer-than-expected June inflation report took some heat out of the move. Markets have since settled on a hold as the base case, with rates staying at 3.50% to 3.75%, but that hasn’t changed the fact that there is still a hike priced in for September.
Headline CPI eased to 3.5% in June, but the Fed’s preferred PCE measure was running at 4.1% in May, more than double its target, while core PCE remained elevated at 3.4%. Chair Kevin Warsh has said the committee has no tolerance for persistently high inflation, and the divisions inside the Fed are becoming increasingly clear.
The minutes from the Fed’s June meeting showed that a few officials already believed there was a case for higher rates. AI-driven demand has also emerged as a new source of inflation concern. The enormous buildout in data centres, electricity and technology infrastructure is boosting demand immediately, while the productivity benefits that could eventually lower prices may take years to arrive.
A pause still looks most likely, meaning Warsh’s press conference is where the real action will be. Investors will be listening for whether a September hike is becoming the Fed’s base case or remains simply an option if inflation stays sticky. And the timing could hardly be trickier. Sweeping new tariffs covering 99% of US imports came into force last week, adding a fresh layer of price pressure to an economy where inflation is already sitting well above target.