Nvidia Surge Fuels Tech Rally as ECB Decision Looms

Asian markets rallied, led by a nearly 3% jump in Japan’s Nikkei, as Nvidia’s stock surge bolstered tech enthusiasm ahead of the ECB policy decision. The US core CPI rose slightly more than expected, reducing hopes for a large Fed rate cut, pushing short-term yields higher and strengthening the dollar against the yen. European stocks are poised for gains, with the EUROSTOXX 50 futures up 1.2% and FTSE futures rising 1%, as the market anticipates a quarter-point ECB rate cut.

Equities

The FTSE 100 fell by 0.2% on Wednesday, weighed down by a significant drop in Rentokil Initial shares, which plunged as much as 20%. The pest control company issued its third warning of weaker annual profits due to disappointing sales in North America, its largest market. Rentokil also announced job cuts in the US to manage cost overruns. In contrast, WH Smith shares rose 10.8% after reporting higher annual revenue and revealing a £50 million buyback plan. Precious metal miners were the best-performing sector of the day, with Centamin adding 1.8%, extending its gains after the $2.5 billion takeover agreement by AngloGold Ashanti.

Across the Atlantic, US markets were boosted by the technology sector, helping the S&P 500 gain 1.07% and the Nasdaq rise 2.17%. Nvidia was a standout performer, jumping 8% after a report suggested that the US government may allow the company to export advanced AI chips to Saudi Arabia. Other tech stocks also saw gains, pushing the broader market higher.

However, US inflation data released earlier in the day tempered investor expectations for a large rate cut by the Federal Reserve. Core CPI rose 0.3% in August, slightly higher than expected. As a result, traders shifted their bets to an 85% probability of a 25 basis point rate cut, down from 66% the previous day, while the chances of a 50 basis point cut dropped significantly.

Solar stocks rallied, with First Solar adding 15.2%, Sunrun up 11.3%, and SolarEdge Technologies rising 8.5%, as investors saw potential gains under a Kamala Harris presidency following a combative debate against Donald Trump. In contrast, Trump-related stocks, including Trump Media & Technology Group, fell 10.5%.

On the downside, GameStop shares dropped nearly 12% after announcing an offering of up to 20 million shares and reporting weaker-than-expected second-quarter revenue. Shares of lithium miners surged, with Albemarle jumping 13.6%, following news from Chinese battery giant CATL about adjustments to lithium carbonate production.

Forex & Commodities

The US dollar traded near a four-week high against the euro following the release of inflation data showing core CPI rising 0.3% in August. This reduced expectations for a large interest rate cut by the Federal Reserve next week, with traders now pricing in an 85% chance of a 25 basis point reduction. Against the yen, the dollar rose 0.31% to 142.805, recovering from a sharp dip the previous day. The pound held steady at $1.3050, after briefly touching a low of $1.30025 earlier.

In commodities, gold prices dipped slightly, with spot gold down 0.1% to $2,513.19 per ounce. The possibility of a new all-time high for gold may have been delayed as inflation data dampened expectations for a larger rate cut by the Fed. Palladium saw a strong rise, gaining 4.8%, driven in part by concerns over Russian export restrictions.

Oil prices climbed more than 2% as fears over production shutdowns in the Gulf of Mexico grew due to Hurricane Francine. Brent crude rose to $70.61 per barrel, while US crude increased to $67.31. Despite a reported rise in US crude inventories, a significant drawdown at the Cushing, Oklahoma oil hub supported prices. Concerns over the impact of the hurricane on tanker flow through the Gulf are expected to continue influencing oil prices.