Global markets rallied and US equity futures are sharply higher, poised to push the S&P to a new all time high, after blowout earnings from Nvidia reassured investors that the global artificial-intelligence juggernaut will keep powering equity markets. As of 7:30am, S&P futures were 0.6% higher and Nasdaq futs gained 1.0% entirely on the back of Nvidia's stunning results which saw the company not only hike its Q2 revenue guidance to a consensus-busting $28BN but also announced a 10:1 forward stock split. Elsewhere, the Bloomberg’s dollar index retreated after touching a one-week high while US Treasuries inched higher after losses on Wednesday; European bond markets showed little reaction to the latest PMI report that revealed private-sector business activity at its highest in a year in the euro area, suggesting an economic rebound is taking hold. Oil was flat; bitcoin traded around $70k while Ethereum looked poised to break above $4,000 on today's SEC approval of an ETH ETF. It's a busy day on the macro front with data from the Chicago Fed, jobless claims, Mfg and Service PMIs and New Home Sales on deck.
In premarket trading, it was all tech and all thanks to Nvidia, whose shares rose 7% adding nearly $200 billion to its market cap and poised to add to its 90%-plus year-to-date rally after it reported first-quarter results that beat expectations and gave an outlook that was seen as strong. The company also announced a stock split and increased its dividend. The optimism also lifted peers such as Super Micro Computer and AMD (AMD +2.7%, Dell +5.7%, Super Micro Computer +4.4%, Intel +0.5%). Here are the other notable premarket movers
“This is another important milestone in the AI journey,” said Guy Miller, chief market strategist at Zurich Insurance Company. “Top-performing companies have to deliver and Nvidia has delivered.” The earnings offer clear evidence of the growing importance of AI, and “that’s going to keeping this juggernaut going,” Miller said.
The Nvidia result overshadowed Wednesday’s release of somewhat hawkish Federal Reserve minutes, which showed officials are in no rush to cut interest rates.
European stocks also rose but losses in utilities, real estate and telecommunication names have capped gains. The Estoxx 50 gains 0.5% in early London session with info tech names leading the move higher as NVDA boosted the region’s semiconductor sector. Meanwhile, UK utilities and homebuilders fall after Prime Minister Rishi Sunak unexpectedly announced the general election for July 4 rather than in the autumn. The tech sector leads gains, while utilities post largest declines. Here are some of the biggest European movers Thursday:
Elsewhere, M&A news continues to flow in, with Hargreaves Lansdown the latest UK firm to receive a takeover bid. Shares in the investment platform soared after it rebuffed a $6 billion private equity offer. Anglo American shares inched higher as BHP Group was seen moving a step closer to a $49 billion takeover of its smaller rival. Millicom International Cellular SA’s Stockholm-listed depositary receipts jumped as France’s Atlas Investissement confirmed it’s exploring an all-cash tender offer for the firm.
Earlier, Asian equities were mixed as a selloff in Chinese and Hong Kong shares offset gains in regional semiconductor stocks following Nvidia’s latest bullish sales forecast. The MSCI Asia Pacific Index was little changed as of 5 p.m. Hong Kong time. Chinese tech shares bucked the broader rally in the sector amid concerns about an intensifying price war in the local AI market. Alibaba and Tencent were among the biggest drags on the regional benchmark. Alibaba is considering selling convertible bonds, to raise about $5 billion, that can be converted into US-listed stock. BHP was another big contributor to the declines as Asian mining stocks fell after copper and gold prices retreated. The Hang Seng China Enterprises Index slid 1.7% to lead regional losses on Thursday. Traders attributed the broad declines in indexes in China and Hong Kong to profit-taking amid a lack of fresh catalysts after a months-long rally. Benchmarks in Japan and Taiwan advanced, while South Korea’s Kospi fluctuated after central bank Governor Rhee Chang Yong said the potential for an interest-rate hike was limited.
In FX, The Bloomberg Dollar Spot Index drops 0.1% paring Wednesday’s 0.3% rise, its best gain this month. The gauge climbed the previous three sessions amid Fedspeak that showed officials want more evidence inflation is moving lower before considering a rate cut
In rates, treasuries were little changed on the day, with yields trading within one basis point of Wednesday’s session close following a rangebound overnight. US 10-year yields around 4.42%, close to Wednesday session close with bunds trading cheaper by 1.5bp in the sector and gilts trading richer by 1bp. European bond markets showed little reaction to purchasing managers indexes (PMI) that revealed private-sector business activity at its highest in a year in the euro area, suggesting an economic rebound is taking hold. Bunds were re lower after the PMI data with German 10-year yields rising 1bps; investors still continued to price the first European Central Bank rate cut in June. Gilts have erased an earlier drop after UK services PMI came in below estimates. UK 10-year yields fall 1bps. US session focus includes $16b 10-year TIPS reopening, which follows a decent 20-year bond sale on Wednesday which traded 0.2bp through the WI level.
In commodities, oil edged higher but held near the lowest closing level in three months; WTI gained 0.5% to trade near $77.90. Gold and copper prices slid further off recent record highs.
Bitcoin trades fimer but remains under $70k while Ethereum continues to gain above $3.8. Overnight, the US House voted to pass the FIT21 cryptocurrency regulations bill that creates a path for cryptocurrencies to be exempt from many securities regulations if they achieve a sufficient level of decentralisation.
Looking at today's calendar, US economic data includes April Chicago Fed national activity index, initial jobless claims (8:30am), May S&P global manufacturing PMI (9:45am), April new home sales (10am) and May Kansas City Fed manufacturing activity (11am). Fed officials’ scheduled speeches include Bostic at 3pm
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APAC stocks traded mixed after the negative performance of cash markets stateside and with US futures boosted after hours owing to Nvidia's earnings which also helped some semiconductor names in Asia. ASX 200 was dragged lower by underperformance in the mining sector after recent declines in underlying metal prices and with industry giant BHP pressured after Anglo American rejected its latest proposal and gave it another 7 days to make an improved offer. Nikkei 225 was underpinned and reclaimed the 39,000 status with the index helped by recent currency weakness and as tech stocks were inspired by Nvidia's strong earnings report. Hang Seng and Shanghai Comp were subdued amid ongoing frictions after the USTR posted details of the proposed tariffs on Chinese imports and China’s took countermeasures against a dozen US firms.
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European bourses (Stoxx 600 +0.2%) hold a modest upward bias, and overall unreactive to the mostly well-received EZ Flash PMI data. European sectors are mixed with no overarching bias. Tech outperforms following NVIDIA's blockbuster earnings and 10-for-1 stock split yesterday. Utilities are dragged lower by National Grid announcing a GBP 7bln rights issue. US Equity Futures (ES +0.5%, NQ +0.8%, YM Unch. RTY +0.2%) are mostly firmer but to varying degrees with the ES and NQ benefitting the most from NVIDIA's (+7% pre-market) blockbuster earnings yesterday.
UBS expects Stoxx 600 year-end target to be 540 (currently 522)
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DB's Jim Reid concludes the overnight wrap
Markets had an eventful day yesterday, with various headlines that drove swings in both directions. As we go to press this morning, sentiment has turned more positive, with futures on the S&P 500 up +0.65% following an upbeat outlook from Nvidia’s results after the close. However, markets had previously lost ground earlier in the day, with the S&P 500 (-0.27%) falling back after the minutes of the latest Fed meeting were on the hawkish side. Moreover, bonds had already sold off after the UK CPI print surprised on the upside earlier in the day, which served as a reminder that the path back to target may not be a smooth one, and led investors to dial back the chance of rate cuts across Europe. In addition, there was also big news on the political side, as UK PM Rishi Sunak announced a general election would take place on July 4, just six weeks from today. So that’s another election in a busy political calendar this year, particularly with the US presidential election in November.
In terms of how the day developed, it began with that UK CPI release shortly after we went to press yesterday. The print showed headline CPI falling to +2.3% in April, which is the lowest in almost three years, and down from +3.2% the previous month. However, the r eading was above the +2.1% expected by the consensus, and core CPI also surprised on the upside at +3.9% (vs. +3.6% expected). So from a market perspective, the focus was on the upside surprise, and investors pushed back the likely timing of a rate cut from the BoE in response. Indeed, the chance of a June cut fell from 52% the previous day to 12% by the close, so there was a clear shift in expectations. And looking further out, just 38bps of rate cuts were priced in by the December meeting, down from 55bps the day before. Following the release, DB’s UK economist now expects the Bank of England to start cutting rates in August, with just 50bps of cuts this year. See his full update here.
That upside inflation surprise led to a major selloff for UK gilts, with the 10yr yield up by a notable +10.3bps on the day, whilst the 2yr yield was up by an even larger +14.7bps. And this was echoed across Europe, where investors dialled back their expectations for ECB cuts as well. In fact, the amount of cuts priced in by the ECB’s December meeting fell by -4.4bps on the day to 64bps, the fewest so far this year. In turn, that prompted a rise in yields across the continent, with those on 10yr bunds (+3.6bps), OATs (+3.5bps) and BTPs (+3.1bps) all rising as well.
Whilst the CPI print provided the initial focus for markets, there was attention on the UK throughout much of the day, as Prime Minister Rishi Sunak unexpectedly announced that a general election would take place on July 4, just six weeks from today. The move came as a surprise relative to 24 hours ago, since an election didn’t have to be held until January 28 at the latest, and the general consensus was it was more likely to take place in the autumn at some point. In terms of the process, the UK has a parliamentary system, so voters vote for individual Members of Parliament rather than directly for the Prime Minister. But as it stands, Politico’s polling average puts the opposition Labour Party on 44%, with the governing Conservatives behind them on 23%. After the election, the transition of power in the UK is immediate if a new government can be formed, so if Labour won a majority of MPs in the House of Commons, then their leader Keir Starmer would become Prime Minister the following day on July 5.
Otherwise yesterday, the main development for markets came after the close with Nvidia’s results. The company exceeded Q1 estimates and provided stronger-than-expected guidance for Q2. They expect revenue of c.$28bn in the current quarter (vs. estimate of $26.8bn) and see demand for its products continuing to outstrip supply into next year. The company also announced a 10-for-1 stock split, with its shares gaining around +6% in after-hours trading and moving above the $1000 a share level. So Nvidia continued to beat expectations, even if less dramatically than its last set of results in February that saw a +16.4% share price rise the next day. Those results have also prompted a rise in US equity futures, with those on the S&P 500 (+0.65%) and the NASDAQ 100 (+0.97%) pointing higher.
Yet before Nvidia’s results came out, it was actually a weak day for equities, with the S&P 500 (-0.27%) coming off its all-time high from the previous session. That selloff came as a result of some hawkish commentary from the latest Fed minutes. In particular, they said that “various participants mentioned a willingness to tighten policy further” if needed. So that pointed to more hawkish concerns than the market had taken away from Powell at the press conference on May 1. Nevertheless, the minutes had only a modest impact on Treasuries, with yields moving 1-2bps higher in their aftermath. And by the close, 2yr yields were up +4.1bps on the day, with much of this rise coming earlier during the European session, while 10yr yields closed +1.1bps higher at 4.42%.
For equities, that weakness came in part from the Magnificent 7 (-0.61%), which posted its worst performance in three weeks. But there was also broader softness after the Fed minutes, with the small cap Russell 2000 (-0.79%) seeing its largest decline so far in May. Within the S&P 500, energy stocks struggled (-1.83%) as oil prices fell for a third consecutive day, with WTI oil down -2.13% to $77.57/bbl, its lowest level in over two months. And this weakness was also prevalent in Europe, with the STOXX 600 (-0.34%) posting a further decline, which came alongside losses for the FTSE 100 (-0.55%), the CAC 40 (-0.61%) and the DAX (-0.25%).
Overnight in Asia, equities have put in a mixed performance. On the one hand, there’ve been solid gains in Japan, with the Nikkei up +1.15%. That comes as the flash manufacturing PMI was up to 50.5 in May, marking its highest level in a year. And there was also a big milestone for Japanese government bond yields yesterday, as the 10yr yield exceeded 1% for the first time since 2012. Elsewhere in Asia though, there’s been a weaker performance, with the Hang Seng (-1.38%), the Shanghai Comp (-1.00%) and the CSI 300 (-0.89%) all losing ground this morning, whilst the KOSPI is only up +0.18% after the Bank of Korea left interest rates unchanged, in line with expectations.
In terms of other data, we’ll get the flash PMIs for May today, but overnight we’ve also had the Australian numbers, where the composite PMI fell to 52.6, down from 53.0 in April. Otherwise, US existing home sales in April fell to an annualised rate of 4.14m in April (vs. 4.23m expected).
To the day ahead now, and the main data release will be the global flash PMIs for May. Otherwise in the US, there’s the weekly initial jobless claims and new home sales for April, and in the Euro Area there’s the European Commission’s preliminary consumer confidence indicator for May. From central banks, we’ll hear from the Fed’s Bostic, the ECB’s Villeroy, and the BoE’s Pill.