Morning Bid: Oracle brings reality check after Fed-inspired rally

A look at the day ⁠ahead in ⁠European and ‍global markets from Ankur Banerjee

Whisper it quietly, but worries around a tech bubble might just resurface after Oracle earnings disappointed investors even ‍as AI spending shows no signs of easing, underscoring the challenge ​the sector faces in turning spending into profits.

That means relief the Federal Reserve did not ​sound more hawkish at its December meeting was fairly short-lived, with stocks sliding and futures pointing to a much lower open in Europe and the United States.

U.S. cloud computing firm ​Oracle provided profit and revenue outlook that missed estimates and said spending would rise by $15 billion compared with earlier estimates.

Oracle's results are considered an indicator ​of whether an AI bubble exists, and also how it will raise money to build that infrastructure.

Oracle shares ‌fell more than 11% in after-hours trade, weighing on U.S. futures and Asian markets, with investor attention now shifting to ​Broadcom, which reports earnings after market close on ⁠Thursday.

European tech stocks will also be in focus, and after a meagre 4% rise so far, this could see its ‌year-to-date gains evaporate. Risk appetite barometer bitcoin fell over 2% in a broad risk off move.

Beyond Oracle, markets got what they were looking for with a 25-basis-point rate cut ‌from the Fed and an added bonus of Fed Chair Jerome Powell sounding less hawkish than ‌what was expected.

"I don't think a rate hike is anyone's base case," Powell said. That was enough for a short-lived risk rally before Oracle earnings.

The Fed's signals reinforced market expectations ‍for two more rate cuts next year, against the Fed's median expectation for a single quarter-percentage-point cut next year.

That exerted ⁠pressure on the U.S. dollar, providing some relief to the yen and lifting the euro to near two-month highs.

Key developments that could influence markets on Thursday:

- Swiss National Bank policy meeting

- U.S. weekly jobless claims

- Earnings at Costco, Broadcom and Lululemon

(By Ankur Banerjee; Editing by Jacqueline Wong)

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