Nvidia Earnings to Reveal AI Spending Trends Amid China Tensions

Nvidia's upcoming earnings report is set to indicate whether AI investment remains strong, especially as competition from China's DeepSeek grows. US stocks struggled on Tuesday, but Hong Kong's Hang Seng Index rebounded 2.5% on Wednesday, with tech stocks surging 3.7%. Meanwhile, US Treasury yields rose after the House advanced Trump’s $4.5 trillion tax-cut plan, boosting expectations for Fed rate cuts and weighing on the dollar.

Equities

The FTSE 100 rose 0.1%, breaking a five-day losing streak, as defence stocks rallied on the UK government's commitment to higher military spending. BAE Systems climbed 4.7% and Rolls-Royce added 1.4% after Prime Minister Keir Starmer confirmed an increase in annual defence spending to 2.5% of GDP by 2027, with a long-term target of 3%. Smith+Nephew advanced 6.1% following an annual results report that met expectations.

Unilever fell 1.3% after CEO Hein Schumacher was unexpectedly replaced by finance chief Fernando Fernandez.

Millions of UK households are set to pay higher energy bills from April after Ofgem raised its price cap by 6.4%, citing surging wholesale costs. Concerns about inflation and the Bank of England's approach to interest rate cuts continued, with traders pricing in 57 basis points of reductions by the end of the year. The midcap FTSE 250 slipped 0.2%, weighed down by a 6.2% drop in CMC Markets after the trading platform announced the departure of its finance chief.

In the US, stock markets were mixed. The Dow Jones Industrial Average edged up 0.37%, while the S&P 500 fell 0.47% and the Nasdaq dropped 1.35%, with both hitting one-month lows. A sharp decline in US consumer confidence, registering its steepest monthly fall since August 2021, weighed on sentiment.

Nvidia declined 2.8% ahead of its highly anticipated earnings report, pulling the Philadelphia Semiconductor Index down 2.3%. The US government is reportedly planning stricter controls on exports of Nvidia chips to China.

Bitcoin fell 6.1%, dragging down crypto stocks. Coinbase lost 6.4%, and MicroStrategy dropped 11.4%. Zoom slid 8.5% after issuing a disappointing annual revenue forecast. Eli Lilly rose 2.3% after launching higher-dose versions of its weight-loss drug Zepbound in vials at a discount to injector pens. Solventum surged 9.5% after Thermo Fisher announced a $4.1 billion acquisition of its purification and filtration business.

Forex & Commodities

The US dollar rose 0.3% to 106.51, pulling away from an 11-week low as short-term Treasury yields rebounded. Weak economic data, including a sharp drop in US consumer confidence, reinforced expectations of two Federal Reserve interest rate cuts this year, with the first likely in July. The Canadian dollar fell to a two-week low, and the Mexican peso weakened as the US prepares to impose new tariffs on both countries from March 4. The yen slipped 0.3% to 149.41 per dollar, reversing gains from Tuesday when it reached its strongest level since October. The euro fell 0.2% to $1.0492, while sterling declined 0.2% to $1.2640 after touching a two-month high earlier in the week.

Gold slipped 0.1% to $2,911.38 per ounce, after dropping more than 2% on Tuesday, as a stronger dollar made the metal more expensive for overseas buyers. The long-term outlook remains positive, with analysts expecting prices to surpass $3,100 due to concerns about inflation and trade tensions. Meanwhile, silver fell 0.2% to $31.66, platinum edged down 0.2% to $964.69, while palladium rose 0.3% to $930.80.

Oil prices edged higher after US crude stockpiles unexpectedly fell last week. Brent crude rose 0.3% to $73.26 per barrel, and WTI climbed 0.3% to $69.16. Prices remain under pressure following weak economic reports from the US and Germany and concerns about potential Trump tariffs on major trading partners. US and Ukraine have agreed on a draft rare minerals deal, which could affect future sanctions on Russia and impact global energy markets.