Nvidia Earnings Hold Global Markets in Anticipation

Nvidia's upcoming earnings report is captivating global markets, with options pricing indicating a potential 10% swing in its stock, translating to over $300 billion in market value. Sterling remains near a 2.5-year high, benefitting from the weakening US dollar amid expectations of significant Fed rate cuts. European and Asian markets traded lightly as investors await Nvidia's results and upcoming inflation data.

Equities

The FTSE 100 edged up 0.2% on Tuesday, marking its fourth consecutive day of gains, driven by strength in travel and mining stocks. Business supplies distributor Bunzl soared 8% to a record high after raising its annual adjusted operating profit forecast, pushing the general industrials index to a new peak. Travel and leisure stocks also performed well, with EasyJet and Wizz Air jumping 6.9% and 5.3%, respectively, after Ryanair upgraded its summer air fare outlook. On the downside, the homebuilders index dropped 4.2%, with major players like Barratt Developments, Berkeley Group, Persimmon, and Taylor Wimpey falling between 3.1% and 6.6%. British retail sales declined for the third straight month in August, with another drop expected in September, leading retailers to cut hiring and investment plans.

In the US, the S&P 500 rose 0.16% to 5,625.80 points, while the Dow Jones Industrial Average inched up 0.02% to 41,250.50 points, closing at a record high for the second consecutive day. Nvidia, at the centre of Wall Street's rally in AI-related stocks, climbed 1.5%, making it the most-traded company on US exchanges. Nvidia’s shares have surged 159% in 2024, with investors eagerly awaiting its quarterly report on Wednesday, which could provide insights into the state of AI and tech sector momentum. Apple saw a modest 0.4% gain, while Amazon dipped 1.4%. Tesla dropped 1.9% following Canada's announcement of a 100% tariff on Chinese electric vehicles, including those made by Tesla. Super Micro Computer fell 2.6% after short seller Hindenburg Research disclosed a short position in the AI server maker.

Volume on US exchanges was light, with 8.6 billion shares traded compared to an average of 11.9 billion over the previous 20 sessions. Despite the subdued trading activity, the S&P 500 posted 50 new highs, while the Nasdaq recorded 62 new highs and 57 new lows. Investors are now focused on Nvidia’s earnings and upcoming economic data for further clues on interest rate movements.

Forex & Commodities

The US dollar hovered near a 13-month low on Wednesday, trading just above 100.51 after losing 3.4% in August, its steepest monthly drop since November 2022. Sterling slightly retreated from its highest level since March 2022, down 0.14% at $1.3243, while the euro slipped 0.24% to $1.1156, staying close to its recent 13-month peak.

In commodities, gold prices gained 0.3% to $2,524.94 per ounce, supported by the weaker dollar, though still shy of last week’s record high. Traders are awaiting Friday’s US Personal Consumption Expenditures (PCE) data, which could influence the Federal Reserve’s rate cut decision. Market sentiment indicates a 63.5% chance of a 25-basis-point cut in September, with some speculating on a larger 50-basis-point reduction.

Oil prices declined by about 2% on Tuesday, with Brent settling at $79.55 per barrel and West Texas Intermediate (WTI) at $75.53 per barrel. The drop followed a sharp three-day rally driven by potential supply disruptions from Libya and Middle East tensions. Analysts suggest the pullback was a technical correction after failing to break resistance around the 200-day moving average.