Global Stocks Hover Near Record Highs as Market Eyes Nvidia Earnings; Sterling Nears 2.5-Year Peak
By Tom Westbrook
SINGAPORE (Multibagger) - Global stocks hovered near record highs on Wednesday, with the next major move hinging on the earnings report from chipmaking titan Nvidia (NASDAQ: NVDA). Meanwhile, sterling approached a 2.5-year high as traders wagered that the United Kingdom will be slower than the U.S. in cutting interest rates.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped by 0.2%, while Japan's Nikkei index remained flat.
Oil prices retraced a recent spike driven by Middle East tensions, as concerns over Chinese demand resurfaced, with Brent crude futures trading just below $80 a barrel.
Nvidia's market value has soared thanks to its dominance in producing the computing hardware essential for artificial intelligence. The stock price has skyrocketed by approximately 3000% since 2019, and with a market capitalization of $3.2 trillion, any move in its shares significantly impacts the entire market.
Second-quarter revenue for Nvidia is expected to have doubled, but even this might fall short of expectations. Options pricing indicates that traders anticipate a near 10%—or $300 billion—swing in market value, likely marking the largest earnings move of any company in history.
According to Capital.com analyst Kyle Rodda, the results from what some call the "most important company in the world" stand between Wall Street and new record highs, setting the tone for the tech sector. "The company's revenue and sales guidance is a barometer of AI capex, with inferences to be drawn about the health of other mega-cap tech names," he noted.
U.S. equities gained about 0.2% overnight, with futures remaining steady in Asia. In contrast, the Hang Seng index in Hong Kong fell by 1.1%, weighed down by a weak performance from water bottler Nongfu Spring, whose shares plummeted by 12%. This came on the heels of downbeat remarks from discount online retailer PDD Holdings.
Australian gambling company Tabcorp saw its shares headed for the largest fall since 2008, dropping 17% to a four-year low after the company warned that compliance and other costs would cause it to miss earnings targets.
Debt and currency markets remained stable during the Asian session. However, the Australian dollar briefly surged to touch its highest level since January at $0.6813 following slightly higher-than-expected monthly inflation data.
Globally, a weakening U.S. dollar in anticipation of rate cuts has lifted most other currencies. Markets expect U.S. short-term rates, currently above 5.25%, to fall the most. The greenback steadied in Asia, buying 144.42 yen and firming by about 0.3% to $1.1145 per euro.
Interest rate futures are pricing in 100 basis points of U.S. rate cuts this year. Last week, Fed Chair Jerome Powell endorsed the start of cuts, stating, "the time has come."
In contrast, the Bank of England's cautious stance has helped sterling become the top-performing G10 currency, with a 4.1% gain year-to-date. Sterling hit its highest level in over two years on Tuesday at $1.3269, easing to $1.3227 during Asian trading.
"UK services sector inflation...is still uncomfortably high," noted Rabobank senior strategist Jane Foley. "In our view, the BoE is likely to only cut rates once a quarter going forward," she said, comparing this to the forecast for four consecutive 25 basis point cuts from the Fed from September to January.
Rates markets remained steady, with 10-year U.S. Treasury yields at 3.83% and two-year yields at 3.87%, with the gap between the two at its narrowest in nearly three weeks.
Heavy selling during the New York evening drove Bitcoin down by 4% to $59,450, while gold held steady at $2,517 an ounce.
Analysis Breakdown for Beginners
- Global Stock Performance: Stocks are very close to their highest ever levels. This means investors are optimistic but cautious, waiting to see how Nvidia's earnings report will influence the market.
- Nvidia's Impact: Nvidia, a leading chipmaker, significantly impacts the market. Its stock price has risen dramatically, and its earnings report could cause major swings in market value.
- Oil and Commodities: Oil prices are fluctuating due to geopolitical tensions and concerns over Chinese demand. This impacts everything from gas prices to heating costs.
- Currency Movements: The U.S. dollar is weakening as traders expect the Federal Reserve to cut interest rates. This makes other currencies stronger in comparison, affecting international trade and travel costs.
- Interest Rates: The U.S. and the UK have different strategies for cutting interest rates, impacting everything from mortgage rates to savings account yields.
Understanding these elements can help you make informed decisions about your investments, savings, and spending.
How This Affects You: If Nvidia's earnings are strong, it could boost stock markets further, enhancing the value of your investments. Conversely, weak earnings could cause market declines. Interest rate cuts in the U.S. could lower borrowing costs, while the UK's cautious approach could impact the value of the British pound and related investments.