The week ahead: Nvidia earnings, and US and European inflation check

We may have thought that tariff risks were yesterday’s concern, but no, they are back to haunt risk sentiment. Stocks sold off on Friday after the  US announced that it would slap the EU with a 50% tariff rate on all products. The impact on markets was swift: European stocks weakened by 2%, US stocks are also lower, led by tech and consumer discretionary. The tariff saga continues to play out, the Vix is back above 20, the gold price is reversing losses from earlier this week and is higher by more than 4% in the last 5 sessions, and the dollar is the weakest currency in the G10 FX space so far this week.

Volatility in the dollar has also surged, especially vs. the JPY and Swissie, as tariff risks boost demand for safe havens. USD/JPY had been above 144.00 at one stage on Friday, it is now below 143, as tariff risks once more weigh on the US dollar. As we look to the weekend, the focus will be on how the EU retaliates. After the US and China managed to negotiate a deal that saw tariff rates drop sharply, the EU may demand the same, however, the EU may have a weaker hand to play compared to China. The EU needs the US market, and there will likely be plenty of corporate pressure on the EU leaders to soften their rhetoric and resist the urge to retaliate to secure the best terms with President Trump.

The sell off in stocks is sharp, but European stocks fared worse after the first announcement of reciprocal tariffs at the start of April. This is a sign that the market believes that the tariff rate will eventually be negotiated below 50%, although the EU may need to provide many concessions to get to this stage, and the clock is ticking, since the deadline is now 1^st June.

Aside from tariffs, another main theme for markets last week was the surge in long-end bond yields. The selling pressure on global bonds, led by the US, eased somewhat on Friday, as stocks sold off and there was a reinvestment into sovereign bonds. However, the yield curve steepening trade continues. This is where longer term yields rise at a faster pace than shorter term yields. It is usually a sign of a healthy economy; however, the speed of the steepening is the problem, and it suggests fiscal distress for some of the west’s largest economies. The 30-year US yield rise above 5%, the highest level since the financial crisis. UK 30-year yields are at their highest level since 1998!

The impact of the latest tariff salvo

If tariff risks persist with the EU, we think the impact on risk sentiment will be more contained than in April. The reason is that the risk is now concentrated in the EU, since the US has already got several trade agreements under its belt, for example with China, the Gulf and the UK. Thus, even if the EU does retaliate with tariffs on US goods over the weekend, we think that the fall out will not have as pronounced an effect as before. However, it does make it hard to see another leg higher in the stock market recovery, and the dollar is likely to remain impacted, while the gold price is expected to remain bid.

Expectations of more rate cuts to counter the tariff threat could ease downside pressure on stocks. The ECB and the Fed are both expected to cut rates more than 2.5 times this year, this had been 2.1 times on Thursday. The UK is still suffering the effects of much higher-than-expected inflation last month, which is limiting investor enthusiasm for pricing in more rate cuts from the BOE. For now, there are 1.6 cuts priced in for this year.

Obviously, the focus in the coming week will be the fallout from the US tariffs on the EU and on Apple. However, there are some key economic and corporate events to watch out for, including important inflation data. Below we give you the low down.

1, European May CPI

The early reading of May CPI will be worth  watching closely to see the impact that recent economic uncertainty has had on price growth. German inflation will be worth watching closely, it is released on Friday. The market expects inflation to fall to 2% from 2.2% in April, and for core prices to drop to 2.7% from 3.1% last month. Transport, recreation and clothing prices are expected to weigh on price growth in May, while motor fuel could add some upward pressure. The trend is for lower inflation in Germany, which opens the door to more rate cuts from the ECB. 

French inflation, which is released earlier in the week, is also expected to remain weak at 0.9%. Energy costs are likely to be the biggest downward contributor, while recreation and travel costs may have picked up. Core prices are also expected to remain stable at 1.9%.

The European Commission will also release its monthly business sentiment index on Tuesday, and this will be closely watched for the export orders component. In recent years, export order activity has been weak, after a post covid peak in February 2022. The May component is expected to tick higher, after falling sharply in April. This could be some front running of US orders to avoid tariffs. However, now that tariffs have been applied on EU imports to the US from 1^st June, the increase in export orders may not last long.

2, US PCE

The Fed has sounded less convinced about rate cuts in recent meetings, stating that they remain in wait and see mode and will assess all incoming data before making their next move. This means that this week’s April core PCE index reading will be worth watching closely. This is the Fed’s preferred inflation metric, and it will feed into the Fed’s view on where rates go next.

The core PCE index for April is expected to  rise by 0.1% on the month, with the annual rate holding steady at 2.6%. With no change in core inflation, it is hard to see the Fed switching course to a more decisive course of action on interest rates. In fairness, the bulk of inflationary pressure from tariffs will take time tom feed through to the index, so we may have to wait for some months before we know what impact President Trump’s trade levies have on price growth.

For now, we do not think that this week’s inflation data will have a big impact on asset prices. A stronger than expected reading may boost the dollar, which was the weakest currency in the G10 FX space last week.

3, Nvidia earnings

On Wednesday evening, after US markets close, all eyes will be on Nvidia’s earnings report for the last quarter. The market is expecting another monster quarter for earnings, with the chip maker set to reassert its dominance, even with tariff threats.

The tariff risks are nothing new for Nvidia. There have been export controls on the most advanced US designed chips into China since Joe Biden’s presidency, which have, so far, not impacted earnings too much. However, recent complaints from Nvidia’s CEO about the controls around AI chip sales to China, suggests that the company is starting to worry that domestically generated chips could soon rival Nvidia. After all, export restrictions into China are likely to fuel domestic production and innovation, which could threaten Nvidia’s global dominance in the advanced GPU market down the line.

We expect this to be the dominant theme on the call next week. Nvidia typically only provides sales guidance for one quarter, so we may not get too much detail on what the export curbs mean for sales.

Markets expectations are for $43.37bn in revenue, higher than the $39.33bn reported the prior quarter. Net income is expected to be $26.02bn, and earnings per share is expected to come in at $0.88. This has been revised down by analysts in the last 4 weeks.

The market also expects Nvidia’s gross margin to shrink last quarter, for the second consecutive quarter. This is to be expected, as Nvidia embarks on growing production of its latest chips, so the market may not see this as a negative. The market will be looking for volume ramp up of GB 200 chips and for Nvidia’s tier 2 cloud. Nvidia’s most advanced chip for sale, the Blackwell, is in production and sales are ahead of estimates, which is good news. However, weaker China sales due to export restrictions on the H20 chip that came into force in January, could act as a counterbalance to the good news on Blackwell sales.

Nvidia is expected to have maintained its pricing power last quarter, which could be good news for profit levels. We will also be looking at the concentration of its customer base, which is typically driven by the big tech hyper scalers. The company has mentioned a proliferation of sovereign customers, and investors will want to hear more about this. Nvidia does not break down sales in any detail, which is a shame since sales of chips to Singapore are important, as this has historically been a route for Nvidia’s most advanced chips to get to China. It will be hard to see if sales to Singapore have dipped, but if there are pockets of sales growth weakness, this could hurt Nvidia’s share price.

The share price is weakening into this report, as big tech sells off on the back of higher volatility. However, the stock price has had a stunning recovery in recent weeks and is one of the top performers in the Magnificent 7,  a big reversal after being a drag on the index for most of 2025. The stock price is higher by a quarter, but it is still lower by 3% YTD and has not been able to return to the record highs from January. Thus, a combination  of reduced volatility and strong earnings could see the recovery rally for Nvidia continue.