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)