Stella Chiu’s Outlook for European and Global Markets
It’s red weather in Asia as AI darling Nvidia failed to live up to the expectations of investors who weren’t content with just beating market expectations in profits, revenue and outlook.
Nvidia’s shares have risen more than 150% this year thanks to insatiable demand for its generative artificial intelligence (AI), so a 7% drop in its shares in after-hours trading may just be a hit for an investment in the world’s second-most valuable company.
However, with stock valuations so high, it may be time to be cautious. Shares in Taiwan-listed semiconductor maker TSMC fell 2%, while Nasdaq futures fell 0.7%. Europe is expected to open lower, with Euro Stoxx 50 futures down 0.2%.
Germany and Spain are next due to release preliminary inflation figures for August later in the day, and several European Central Bank officials are due to take part in a panel discussion.
Headline inflation in Germany is expected to slow to 2.3% and in Spain to 2.5%. Any unexpected downside in those countries could affect euro zone inflation numbers due on Friday and raise the chances of continued ECB easing for the rest of the year.
Swaps suggest a September rate cut is a certainty, but there is less certainty about the likelihood of cuts in October and December, with roughly 60 basis points of cuts priced in by the end of the year.
A volatile U.S. jobless claims report, due to be released later in the day, will also be in focus after Federal Reserve Chairman Jerome Powell declared that policymakers do not want to allow the labor market to weaken further.
Meanwhile, currencies were broadly stable in Asia.The New Zealand dollar rose 0.6% to a 2024 high of $0.6281 after a local survey showed a strong pick-up in business activity following the Reserve Bank of New Zealand’s interest rate cut.
U.S. Treasury yields were also quiet, but the yield curves on two-year and 10-year notes were on the verge of turning positive for the first time since July 2022, unless they temporarily reversed during the Japanese market sell-off earlier this month.
The yield on the two-year note was at 3.8671%, just 3 basis points higher than the 10-year note yield.
Key trends that could impact markets on Thursday:
– Spain and Germany August CPI Preliminary Figures
– U.S. weekly jobless claims
– ECB Chief Economist Philip R. Lane will be on the panel
– ECB Vice Presidents Aino Bunge and Olli Rehn take part in panel discussion
– US Q2 GDP final figures
(Editing by Muralikumar Anantharaman)
