Nvidia Soars 13%, BoE Rate Cut Anticipation Builds

Nvidia's stock surged 13% amid renewed tech euphoria, while Meta's earnings beat expectations, pushing its shares up 7%. European shares showed subdued movement, with FTSE futures rising 0.3%, as markets anticipate a Bank of England rate cut. The Bank of Japan's rate hike and the Federal Reserve's rate cut hints add to global market dynamics.

Equities

The FTSE 100 rose by 1.1% on July 31, marking its best month since April, bolstered by gains in energy and mining stocks, along with positive corporate updates. BP and Shell saw their shares climb by 1.6% and 2.7%, respectively, as tensions in the Middle East pushed oil prices higher by over $1 per barrel. Industrial metal miners surged by 2.7% due to firming base metal prices. HSBC shares jumped 4% following the bank's announcement of a $3 billion share buyback and stable first-half profit that beat estimates, lifting the banking sector to its highest levels since May 2018.

In the US, the S&P 500 and Nasdaq recorded their largest daily percentage gains since February 22, while the Dow also increased on the same day. Chip stocks led the rally, driven by Nvidia's nearly 13% jump after Advanced Micro Devices provided a positive sales forecast for AI chips, boosting its own shares by 4.3%. The Philadelphia SE Semiconductor index rose by nearly 7%. The Fed maintained interest rates in the 5.25%-5.50% range but hinted at possible easing in September. This decision coincided with a 9.8 basis points drop in the 10-year US Treasury yield to 4.043%.

The Dow Jones Industrial Average climbed by 0.24% to 40,842.79, the S&P 500 gained 1.58% to 5,522.30, and the Nasdaq Composite advanced 2.64% to 17,599.40. Microsoft dipped by 1% due to high AI-related expenses, while Meta rose by 5% after beating earnings expectations. Apple and Amazon, set to report earnings, closed up by 1.5% and 2.9%, respectively.

Forex & Commodities

The US dollar declined further on Wednesday after the Federal Reserve hinted at a potential rate cut in September. The dollar index dropped to a low of 103.92, down 0.34% for a monthly loss. The yen hit a four-month high against the dollar, with a 1.87% drop to 149.91 yen, driven by the Bank of Japan's rate hike and expectations of further increases.

Gold prices rose, with spot gold climbing 1.2% to $2,437.39 per ounce, marking its biggest monthly gain since March at over 4%. This increase followed Fed Chair Jerome Powell's comments suggesting a rate cut could be on the horizon if inflation trends favourably.

Oil prices saw significant gains, with Brent crude futures for September delivery rising by 2.66% to $80.72 per barrel and US West Texas Intermediate crude futures climbing 4.26% to settle at $77.91 per barrel, the largest daily gain since October 2023. This increase was fuelled by concerns over escalating tensions in the Middle East and a larger-than-expected decrease in US crude stockpiles.

In the UK, the pound rose 0.11% to $1.2848, poised for a 1.5% monthly gain. Sterling options volatility hit its highest in nearly a year, reflecting market nervousness ahead of the Bank of England's rate decision, with markets pricing in a 66% chance of a rate cut. Meanwhile, the euro gained 0.05% to $1.082, set for a 1% gain in July, despite mixed data on eurozone inflation and services sector growth.