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

Ankur Banerjee

Markets have decided to nervously look away from the brewing

Trump v Fed saga for now, putting the spotlight on the political

crisis gripping France that has triggered a sharp selloff in

stocks and bonds of the euro zone's second-biggest economy.

French Prime Minister Francois Bayrou's gamble to win

backing for his deeply unpopular debt-reduction plan backfired

on Tuesday, plunging the country deeper into political and

financial instability.

FRENCH WORRIES

Investors will keep an eye on France's blue-chip CAC40 index

, which is down more than 3% this week as well as the

banking stocks that have borne the worst of the beating so far.

The bond market reaction will also be crucial after the gap

between French and German 10-year yields, a gauge of the premium

investors require to hold French debt, widened on Tuesday to

around 79 basis points - its largest since April.

We have been here before as France lost its last prime

minister, Michel Barnier, to a no-confidence vote over the

budget in late 2024, after just three months in office following

another snap election in July that year.

Stock futures and currencies have been fairly calm in Asian

hours but with the economic calendar light, political and fiscal

worries may take centre-stage.

Bond-market ruction is being felt across the globe again

with the U.S. Treasuries curve steepening after President Donald

Trump on Monday ordered the firing of Federal Reserve Governor

Lisa Cook, an unprecedented move that could lead to a legal

tussle. Cook intends to file a lawsuit to prevent her firing.

Markets appear to be nervous but have broadly shrugged off

the attack on the Fed's independence, with the yield on the

30-year Treasury note not even threatening to breach 5% as would

reasonably be expected.

Perhaps investors are being complacent or they are waiting

for big institutional money to make a shift in moving away from

the U.S. assets. As history tells us, it's OK until it's not.

Just look at Turkey.

NVIDIA

Wednesday's main event no doubt will be the earnings report

from Nvidia that will set the tone for near-term risk appetite

and whether the sky-high valuation for AI darlings is justified.

Caught in the crossfire of Washington and Beijing's ongoing

trade war, the fate of Nvidia's China business hangs on where

the world's two largest economies land on tariff talks and chip

trade curbs. That is where investor attention will be.

Overall, the $4.4 trillion AI chipmaker is set to report a

53% rise in second-quarter revenue to $46 billion, LSEG data

showed, and yet it may not be enough to satiate investors as

that jump is still a far cry from the triple-digit growth it

witnessed for many recent quarters.

Therein lies the challenge for a stock that has risen 35%

this year and sways the broader market on its every movement.

Options traders are pricing in a swing of about $260 billion in

the firm's market capitalisation after the result.

Key developments that could influence markets on Wednesday:

* Germany GfK Consumer Sentiment for September