NVIDIA reported record earnings and issued an encouraging outlook. Traders are no longer reacting to the Fed’s hawkish bias :: InvestMacro

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was up 0.13%. The S&P 500 Index (US500) added 0.13% yesterday. The NASDAQ Technology Index (US100) closed negative 0.32%. Liquidation of long positions in high-yielding artificial intelligence (AI) technology stocks weighed on the overall market on Wednesday ahead of NVIDIA Corporation’s (NVDA) earnings release. But NVDA shares jumped more than 10% in late trading after its quarterly earnings beat forecasts, and the chipmaker predicted better-than-expected revenue in the next quarter.

Minutes from the January 30-31 FOMC meeting proved hawkish, as it said most participants noted the risks of easing policy too quickly and stressed the importance of carefully evaluating incoming data to judge whether inflation is steadily easing to 2%. Fed spokeswoman Bowman said yesterday that given the current economic environment, the time for the Fed to cut interest rates is definitely not now.

FRB Richmond President Barkin also noted that recent economic data suggest that price pressures in some sectors are still too great despite an improving overall inflation picture. But despite the hawkish nature of the remarks, markets reacted calmly, suggesting that investors have postponed their rate cut expectations until later.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.29%, France’s CAC 40 (FR40) gained 0.22%, Spain’s IBEX 35 (ES35) jumped by 0.69% on Wednesday, and the UK’s FTSE 100 (UK100) closed negative 0.73%. Following their global peers, European equity markets opened higher on Thursday as an encouraging earnings report from chip giant Nvidia boosted investor confidence. Investors also overlooked the latest Federal Reserve meeting minutes, which indicated the central bank would delay interest rate cuts.

British economists at Pantheon Macroeconomics revised their forecast for the Bank of England’s first June rate cut since May. This adjustment is due to the strategic timing of allowing the Monetary Policy Committee (MPC) to consider additional economic data before making a decision. In particular, waiting until June will allow the MPC to review April labor market data, reflecting the impact of the National Living Wage (NLW) increase on wages.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 0.26% for the day, China’s FTSE China A50 (CHA50) added 2.19%, Hong Kong’s Hang Seng (HK50) increased by 1.57% on the day, and Australia’s ASX 200 (AU200) was negative 0.66% on the day.

Nvidia’s share gains spilled to Asian chipmaker stocks as strong results and guidance suggested increased demand for artificial intelligence developments. Japan’s Advantest Corp. and Taiwan’s TSMC (NYSE: TSM), both suppliers to Nvidia, rose by 4.7% and 1.2%, respectively. The rise in shares of leading tech companies led Japan’s Nikkei 225 Index (JP225) to jump 1.8% to a record intraday high of 39,001.50 points, breaking the 1989 peak that preceded the deflation of Japan’s huge speculative bubble in the 1990s. But it should be noted that the Bank of Japan’s ultra-soft stance has been one of the main drivers of the rally in Japanese stocks in recent months.

Broader Asian stocks are trading weaker. After seven straight sessions of gains, Chinese stocks were weak on Thursday, as much of the rebound was driven by heavy-handed government restrictions. Beijing banned institutional traders from building sell positions near the market’s open and close.

Australian economists moved their forecasts for the start of the Reserve Bank’s (RBA) easing cycle, reflecting a slight reduction in inflation estimates and bringing them in line with current money market prices. Under the new forecasts, the RBA will cut the money rate by a quarter percentage point to 4.1% in the third quarter of 2024. Judo Bank’s Australian manufacturing PMI fell to 47.7 in February 2024 from 50.1 a month earlier, flash data showed. This was due to a significant drop in new orders, which led to a downturn in production. High interest rates and difficult manufacturing conditions weakened demand, leading to the sharpest decline in output since May 2020. Employment and purchasing activity fell accordingly.

S&P 500 (US500) 4,981.80 +6.29 (+0.13%)

Dow Jones (US30) 38,612.24 +48.44 (+0.13%)

DAX (DE40)  17,118.12 +49.69 (+0.29%)

FTSE 100 (UK100) 7,662.51 −56.70 (−0.73%)

USD Index  103.87 −0.13 (−0.13%)

Important events today:

• – Australia Manufacturing PMI (m/m) at 00:00 (GMT+2);
• – Australia Services PMI (m/m) at 00:00 (GMT+2);
• – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
• – Japan Services PMI (m/m) at 02:30 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – German Services PMI (m/m) at 10:30 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone ECB Monetary Policy Meeting Minutes at 14:30 (GMT+2);
• – Canada Retail Sales (m/m) at 15:30 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+2);
• – US Services PMI (m/m) at 16:45 (GMT+2);
• – US Existing Home Sales (m/m) at 17:00 (GMT+2);
• – US Natural Gas Reserves (w/w) at 17:30 (GMT+2);
• – US Crude Oil Reserves (w/w) at 18:00 (GMT+2);
• – New Zealand Retail Sales (m/m) at 23:45 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.