Top 3 Economic Stories of the Week

Federal Reserve Cut Awaits Global Markets

We reported on it last week, its back again! The Federal Reserve are likely to implement their first rate cut of 2025 in their September 17th meeting. As mentioned in previous reports, the cut has been influenced by jobless claims reaching a four year high of 263,000 Americans as reports showed that there were over 900,000 fewer jobs created than initially reported. However, the Fed have some difficult decisions to make as inflation creeped up to 2.9% in August, creating confliction between macroeconomic goals. Meanwhile, economists have argued that the rate cut could trigger a broader easing cycle that could boost markets, but as previously stated, the Fed will have walk a fine line risking inflationary pressures from ongoing tariffs implemented by the Trump administration.

Oracle's Revenue Projection Sends AI Stock Through the Roof

The Oracle (ORCL) stock saw a 36% increase as Safra Catz (Oracle CEO) forecasted that AI-based cloud infrastructure revenue would jump from $18bn in 2025, to a monumental $144bn by 2030. The projection made by the CEO showed a major contrast to an MIT study from last week, which showed that 95% of AI investments were yet to deliver any return on investment. For a brief amount of time (around a day), the surge in stock prices saw Larry Ellison, co-founder and roughly 40% shareholder of Oracle, became the richest man in the world, surpassing Elon Musk, before Musk became richest man in the world again.

Successful Trade Diversification for China

Some critics have argued that stats show China has successfully diversified its trade relationships, after Trumps tariffs led to a 33% decrease in Chinese exports to the US. The success can be seen through Chinese exports growing by 4.4% in August. This comes after exports to Southeast Asia climbed 22.5% and exports to the EU increased by 10%. This displays China's trade resilience and the limits of US tariff policy. To America's misfortune, the success of China indicates that the global economy is adapting to trade realignment which could potentially limit American leverage in future negotiations.

Policy Updates: European Central Bank Spotlight

While we usually look at multiple central banks and fiscal policy movements, I have already mentioned the Fed, and the BoE awaits its 17th September meeting, so I thought we could take a deep dive into the ECB instead. The ECB has held its deposit rate at 2% this week. After rates have fallen dramatically since a peak in 2023, the Governing Council decided against further cuts this month. We look towards inflation in Europe to answer questions around why rates have held steady. Headlines suggest an inflation rate around 2.5%, but economists have suggested that services and wage pressures have pushed actual inflation above the given headline. The economic conditions in the Eurozone vary, from Germany's current industrial weakness, to Spain's resilience - as S&P Global upgraded Spain's long term sovereign credit rating to A+. The ECB's tone this week - through the voice of President Christine Lagarde - was ensuring that the ECB was data dependent, stating that they "are not pre-committing to a particular rate path, and in any case, we stand ready to adjust all of our instruments.”

Industry Insight: Finance (Financials)

In last weeks report, we delved into the technology sector - this week I thought we could take a look at the Finance sector.

This week, statistics show that Q3 2025 earnings per share (EPS) growth is projected at 10% year-on-year for the Financials Sector, which sits above the S&P 500 average. Around 65% of (finance) firms have given positive outlook around profit, and big U.S. banks such as JPMorgan have suggested better-than-expected trading revenues for Q3 2025. These bright forecasts could be clouded by the some banks fear that households will take on more debt, but nothing alarming has come up yet. Another risk is the possibility of multiple cuts in interest rates over the next 6 months, which would reduce the returns from lending for banks. Overall, financials are shaping up to be a quiet outperformer this quarter, but their success relies heavily on the scale of upcoming Fed policy.