Nvidia's Earnings To Test Wall Street This Week

Equities

The FTSE 100 index enjoyed its most substantial daily increase in four months with a 1.5% rise. This contributed to a weekly gain of nearly 2%, a welcome recovery after a fortnight of losses. Boosting this performance were key sectors such as miners and banks, buoyed by optimism surrounding potential interest rate cuts from the Bank of England, sparked by recent economic indicators.

In particular, shares of NatWest saw a notable jump of 7.4% following the announcement of Paul Thwaite as its permanent chief executive and a profit report that exceeded expectations for 2023. The industrial metal mining sector advanced by 2.9% in response to rising base metal prices.

Additional highlights from the UK market include Segro, which saw its shares climb by 1.9%. The warehousing group reported an annual profit that surpassed forecasts and expressed optimism about its investment market business prospects for 2024.

Across the pond, the US market was abuzz with anticipation ahead of Nvidia’s earnings report, seen as a litmus test for the artificial intelligence (AI) industry's buoyancy, which has been a significant driver of recent stock market gains. Nvidia, whose shares have surged by over 46% since the start of the year, is pivotal to the AI sector and the broader market sentiment. The chipmaker's performance has notably contributed to more than a quarter of the S&P 500's increase this year. Wall Street has set its expectations high, increasing the scope for disappointment.

Forex & Commodities

On Monday, the US dollar held its ground following recent data indicating persistent inflation in the US, sparking debates about the timing of the Federal Reserve's anticipated monetary easing. With US markets closed for Presidents' Day, trading volumes were expected to be low.

The Japanese yen, on the other hand, saw a slight uptick against the dollar but has generally been weak, trading near the 150 mark against the dollar, amid concerns over potential intervention by Japanese authorities to support the currency.

Speculation around the Bank of Japan's policy direction has influenced the yen, particularly as US-Japan interest rate differentials widen, making the yen a target for short-selling.

The British pound gained slightly after reports of strong UK retail sales, though market expectations for the Bank of England's monetary policy remain largely unchanged, with anticipated rate cuts totalling 64 basis points for the year.

Turning to commodities, gold faced its second consecutive weekly decline, influenced by the same inflation data that has tempered expectations for early rate cuts by the Federal Reserve. Higher interest rates, which dampen gold's appeal, alongside robust economic indicators suggesting continued inflationary pressure, have challenged gold's position as an inflation hedge.

Oil prices dropped as concerns over sustained US inflation and potential for higher interest rates dampened demand outlooks, especially with attention on demand from China as it emerges from the Lunar New Year holiday.