Aug 25 (Reuters) - A look at the day ahead in European

and global markets from Wayne Cole.

Asian markets have so far managed a cautious cheer for Fed

Chair Jerome Powell's seemingly dovish turn last week, with the

Nikkei up and Chinese stocks extending their recent rousing run.

Chinese blue chips have climbed almost 10% so far this month

to reach ground not trod since mid-2022, even as domestic demand

remains tepid and companies have no pricing power to speak of.

That's the power of momentum. Why are shares going up?

Because people are buying them. Why are they buying? Because

they're going up.

European and U.S. stock futures are in a more sober mood

after Friday's euphoria, perhaps reflecting the realisation that

things must be getting worse for the U.S. economy for the Fed to

consider cutting rates even as inflation heads for 3% and above.

The "why" matters. It's one thing to ease policy because

inflation is cooling, but another thing entirely to have to ease

to support the economy and head off an unwelcome rise in

unemployment. Powell argued the inflationary impact of tariffs

was likely to be a one-off rise in the price level, but that

risks sounding like the "transitory" tag given to the initial

spike in prices post-COVID.

The Fed's favoured core PCE price index due on Friday is

already expected to tick up to a 19-month high of 2.9%, and a

3.0% reading would cause some sticker shock for the long end of

the Treasury curve. The Street also has to digest $183 billion

in new supply this week, an outsized meal even for a market this

big.

Talking of outsized, Nvidia reports on Wednesday and needs

to knock the lights out to justify its $4 trillion market cap -

which is fast approaching the worth of the entire Nikkei index.

Expectations are for a mere 48% rise in earnings per share

on revenue of almost $46 billion, so the bar is high. Which

could be why options imply the chance of a 6% move in the share

price in either direction depending on the results.

It was notable last week that tech stumbled a little as some

began to wonder how much of hundreds of billions of dollars

going into AI investment will ever make a return, or is this

another dot-com bubble.

There will be much interest in how exactly the proposed deal

with President Trump works, where Nvidia pays the U.S.

government 15% of its earnings on some chips sold to China in

return for export permits. Details are scarce and analysts are

not even sure that it's constitutional, but that's State

Capitalism with American Characteristics for you.

Key developments that could influence markets on Monday:

- Ifo business survey for August. U.S. July new home sales,

Chicago and Dallas Fed manufacturing surveys

- Federal Reserve Bank of New York President John Williams

and Fed Bank of Dallas President Lorie Logan speak

(Editing by Sam Holmes)