World market themes for the week ahead: Global rate cuts? We’re halfway there

Global markets are heading into what promises to be another volatile week, as investors fret stocks might be looking too pricey and even a reasonably solid earnings season so far hasn’t been able to soothe those jitters.Around half of the world’s developed-market central banks have started cutting interest rates - the Bank of England did so on Aug. 1 and the Federal Reserve is teeing up a cut for September.

Weaker readings of U.S. business activity and employment have prompted investors to assess whether rate cuts are a reflection of an economy that is weaker than they bargained for and it is time to take some money off the table.A U.S. corporate earnings season that has come in better than expected so far gets a fresh test in the coming week, with a number of high-profile reports due.

While most of the megacap companies will have reported already, other important results are expected in the days ahead. Those include industrial bellwether Caterpillar , media and entertainment giant Walt Disney, weight-loss drugmaker Eli Lilly and Super Micro Computer, which is at the centre of the market’s artificial intelligence excitement.

Officials will be keeping a close eye on Friday’s inflation report for clues on how much more needs to be done to bolster anaemic domestic demand, especially after policymakers signalled their support for more consumer-directed stimulus measures.Novo Nordisk, Europe’s most valuable company, releases its second-quarter results on Wednesday.

Novo accounts for almost 4% of Europe’s STOXX 600, so its results carry more weight for the broader index than ever.From an outside chance of a rate hike at the Reserve Bank of Australia’s Aug. 5-6 policy meeting, traders switched to pricing in the risk of a rate cut by year-end instead - all because of one soft inflation reading.

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