Asian Markets Tumble as Nvidia's Results Disappoint and Investor Sentiment Wavers
By Stella Qiu
SYDNEY (Multibagger) - Asian markets mirrored Wall Street futures' decline on Thursday, following Nvidia (NASDAQ:)'s earnings report which fell short of the sky-high expectations of bullish investors. Meanwhile, the dollar steadied, and the Treasury yield curve approached a potential shift to positive territory.
Key Economic Indicators Awaited
Investors are now keenly awaiting the release of U.S. weekly jobless claims, which have gained increased significance given the Federal Reserve's focus on labor market health. Additionally, inflation data from Germany and Spain are being closely monitored for hints on future rate cuts post-September.
Market Performance Overview
MSCI's broadest index of Asia-Pacific shares outside Japan fell by 0.6%, dragged down by tech stocks. The Nikkei dropped 0.4%, while South Korea's market declined by 0.7%.
Despite Nvidia's third-quarter revenue forecast of $32.5 billion surpassing Wall Street estimates, the results failed to impress the most bullish investors, leading to a 7.6% drop in after-hour trading. This resulted in a substantial $236 billion loss in its market value. Consequently, Nasdaq futures plummeted 1% early in Asia, while S&P 500 futures fell by 0.5%.
Nvidia's chip contractor, TSMC, saw a 2.4% decline in shares upon market opening, pulling the broader Taiwanese market down by 1.3%.
Expert Analysis
"Nvidia, in some ways, has become a victim of its success, with its share price soaring over 180% this year and beating earnings in 14 of the past 15 quarters," said Tony Sycamore, an analyst at IG. "Whether today's results signal the end of investors' strong affinity for the chipmaker remains to be seen. However, it's an excellent time to consider diversifying from Nvidia into other chipmakers."
Chinese Markets and Economic Outlook
China's blue-chip stocks fell by 0.4% for the fourth consecutive day due to disappointing corporate results, highlighting the country's fragile economic recovery. UBS recently cut its 2024 GDP growth forecast for China to 4.6% from 4.9%. Chinese battery maker CATL dropped 2% after top Republican lawmakers called for the company to be added to a restricted list of firms allegedly working with Beijing's military.
In contrast, Chinese food delivery giant Meituan surged by 7% after reporting a better-than-expected 21% rise in second-quarter revenue.
Global Economic Signals
Debt and currency markets remained mostly steady in the Asian session. Fed Atlanta President Raphael Bostic suggested it might be "time to move" on rate cuts, pending confirmation from upcoming jobs and inflation reports before the September meeting. The dollar stabilized above its one-year lows, impacted by expectations of imminent Fed rate cuts. Futures markets have fully priced in a quarter-point cut next month, with a 35% chance of a half-point easing.
The euro held at $1.113, having dropped 0.6% overnight, and failed to break significant resistance at $1.12.
Treasury Yield Curve Insights
Treasury yields were mixed overnight, but the inverted yield curve between the two-year and 10-year notes continued to steepen, nearing a positive shift for the first time since July 2022, except for a brief un-inversion during the recent market crash. Two-year yields held at 3.8692%, having slipped 4 basis points overnight, while 10-year yields remained relatively unchanged at 3.8368%, just 3 basis points below the two-year yield.
Commodity Markets
Gold prices climbed again, nearing a new peak. Gold was up 0.4% at $2,512.89 an ounce, just shy of its record $2,531.6. Oil prices edged higher after two consecutive days of declines, with concerns about demand from China and the U.S. balanced against supply disruptions from Libya. Brent crude futures rose 0.1% to $78.75 a barrel, while U.S. West Texas Intermediate crude futures gained 0.2% to $74.69.
Analysis for Everyday Investors
For those less familiar with financial markets, here's a simple breakdown: Nvidia, a major player in the tech industry, reported strong earnings, but not strong enough to satisfy the high expectations of some investors. This led to a drop in Nvidia's stock price, which in turn affected other markets, particularly in Asia. Additionally, economic indicators from the U.S. and Europe are being closely watched to understand future interest rate changes, which can impact everything from your mortgage rates to your savings account interest. Lastly, gold and oil prices are fluctuating due to various global economic factors. Keeping an eye on these trends can help you make more informed decisions about your investments and financial planning.