Last week, the Jackson Hole event, where central bank governors came together, was the most talked about event in global markets. Powell's statements last Friday indicate that the two-year fight against inflation is nearing its end. During this process, the most powerful weapon used by central banks in the fight against inflation has been interest. Although high interest rates are effective in disinflation, they have always created fear of growth in the economy during this process.
Bank of England Governor Andrew Bailey and Fed Chairman Jerome Powell opposed concerns that growth would have to be sacrificed to achieve inflation targets in their Jackson Hole speeches. Heather Boushey, one of US President Biden's advisors, also said in an interview with the Financial Times, "Nobody knows exactly what the next few months will bring, but the data suggests that low unemployment and ongoing strength will continue."
A trend of interest rate cuts has begun in global central banks, but statements are quite cautious. The fight against inflation between 2022 and 2024 has been bumpy. The Russia-Ukraine war and conflicts in the Middle East have increased pressure on the commodity side and disrupted the fight from time to time. That's why the statements always say continue under control. The European Central Bank, the Bank of England and the Bank of Canada lowered interest rates this summer and the declines are expected to continue in the coming months.
As Powell pointed out on Friday, the Fed is expected to join them in September. When inflation concerns first emerged globally, central bank governors described this trend as 'temporary'. However, the world has since faced quite rigid and permanent inflation. That's why central bank governors in Jackson Hole pointed to the data with cautious statements.
Mixed pricing in oil continues. While the slowdown in the global economy increases demand-side concerns, geopolitical developments bring supply problems to the agenda. The latest address for supply-side pressure is Libya. Libya, which was divided into eastern and western governments 10 years ago, is experiencing a 'central bank governor' crisis. While the country recognized by the international community is Western Libya, the regions rich in oil are in Eastern Libya. While the government in western Libya is globally recognized, its eastern rival has the support of Khalifa Haftar, the leader of the Libyan National Army, the country’s most powerful armed force, which controls large areas in the east and south. The western Libyan government is trying to replace central bank governor Sadiq al-Kabir, who has refused to resign. Al-Kabir has been criticized for mismanaging oil revenues.
Eastern Libyan authorities have also decided to freeze all oil production and exports in response to this move. Libya, which has the largest oil reserves in Africa, produced an average of 1.2 million barrels of crude oil per day last year, making a significant contribution to world supply. The benchmark Brent crude oil that we follow globally rose to $81.35 per barrel following this news, reaching an 11-day high. Despite supply concerns, demand is expected to fall in 2025.
Goldman Sachs and Morgan Stanley have released reports downgrading their price estimates due to increased global supply. Both institutions predict that Brent crude will average below $80 per barrel in 2025. Morgan Stanley analysts said, "While we have seen a deficit in the oil markets for a while, we think that the balance will be restored and we will see excess inventories in 2025." Brent crude has averaged around $83 so far this year. The most negative of Goldman's scenarios is that Brent falls to $60 if China's oil demand remains stagnant.
The world's largest defense companies are preparing to generate record cash over the next three years by taking advantage of the increase in new weapons orders from countries amid rising geopolitical tensions. According to analysis by Vertical Research Partners, the top 15 defense companies are projected to generate $52 billion in free cash flow in 2026. The cash flow generated will be almost double the total cash flow generated in 2021.
In Europe, national companies such as BAE Systems, Rheinmetall and Sweden’s Saab are expected to see their total cash flows increase by more than 40%. The defense industry sector continues to grow as the Russia-Ukraine war and tensions in the Middle East and Asia escalate, and governments increase their budgets. This increase in government spending has pushed orders to record levels. In the defense industry, it usually takes several years for new contracts to translate into high sales. Companies make the vast majority of their collections with deliveries.
The most talked about topic globally last week was Nvidia's balance sheet. Nvidia exceeded expectations in the second quarter of 2025, which ended on July 28, with a 122% increase in revenue to $30 billion. While strong demand for artificial intelligence chips continues to support the company's growth performance, Nvidia's net profit in the quarter also increased by 168% to $16.6 billion. The company also increased its revenue by 15% compared to the previous quarter and set a new revenue target of $32.5 billion during this period. Nvidia also approved a new share buyback of $50 billion.
Nvidia's balance sheet, which shows the impact of the artificial intelligence boom on the technology sector, provides an idea of the general momentum in the sector. CEO Jensen Huang stated that demand for existing Hopper chips remains strong, and announced that the delayed Blackwell chips will start production in the fourth quarter and will continue until 2026. Despite the strong results, Nvidia shares fell 5.98% to $118.10 in after-hours trading. The market is somewhat cautious when pricing in expectations. Nvidia, which has gained more than 150% since the beginning of the year and has a market value of over $3 trillion, continues its growth story but faces increasing risk perception from investors.
Nvidia CEO Jensen Huang emphasized in his statement regarding the financial results that global data centers continue to modernize with demands for artificial intelligence and accelerated computing. The strong demand for the company's products continues to underscore Nvidia's future growth potential. Although data is weak, we are leaving behind a busy week in terms of news flow. We have very important data such as inflation and PMI next week. Have a good weekend everyone.
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