Global equities close to record highs ahead of Nvidia earnings

Singapore — Global stocks were poised near record highs on Wednesday, with the next move riding on results at chipmaking market darling Nvidia, while sterling hovered near a two-and-a-half-year high as traders bet that Britain will lag the US in cutting interest rates.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2%. Japan’s Nikkei was flat.

Oil retraced a recent spike on Middle East tension as gloom on Chinese demand returned to the fore and Brent crude futures traded just below $80 a barrel.

Nvidia’s market value has ballooned thanks to its dominance of the computing hardware behind artificial intelligence (AI). The stock price is up about 3,000% since 2019 and with a market capitalisation of $3.2-trillion, a move in its shares affects the entire market.

Second-quarter revenue is likely to have doubled, though even that may disappoint expectations. Options pricing shows traders anticipate a near 10% — or $300bn — swing in market value, likely the largest earnings move of any company, ever.

The results at the “most important company in the world” stand between Wall Street and fresh record highs, noted Capital.com analyst Kyle Rodda, and set the tone for the sector.

“The company’s revenue and sales guidance is a barometer of AI capex, with inferences to be drawn about the health of the other mega-cap tech names,” he said.

The S&P 500 went up about 0.2% overnight and futures were steady in Asia, while Nasdaq 100 futures fell 0.1% and FTSE futures rose 0.2%.

Consumer firms dragged in Hong Kong, where the Hang Seng slipped 1.1%, with a weak result at water bottler Nongfu Spring sending shares down 12% and coming on the heels of downbeat remarks from discount online retailer PDD Holdings.

Shares in Australian gambling company Tabcorp were headed for their largest fall since 2008, dropping 17% to a four-year low after the company warned compliance and other costs meant it would miss earnings targets.

Debt and currency markets were steady in the Asia session, though the Australian dollar briefly popped to touch its highest since January at $0.6813 after monthly inflation data was slightly above market forecasts.

Globally, a weakening dollar in anticipation of US rate cuts has lifted most other currencies because markets see US short-term rates, currently above 5.25%, as having furthest to fall. The greenback steadied in the Asia session to buy ¥144.42 and was about 0.3% firmer at $1.1145 to the euro.

Interest rate futures price 100 basis points (bps) of US rate cuts in 2024 and last week Fed chair Jerome Powell endorsed the start of cuts saying “the time has come”.

The tone contrasts with caution at the Bank of England, which has helped sterling become the top-performing G10 currency with a 4.1% gain for the year to date.

It hit its highest in more than two years on Tuesday at $1.3269 and eased to $1.3227 in Asia trade.

“UK services sector inflation ... is still uncomfortably high,” Rabobank senior strategist Jane Foley said in a note.

“In our view, the BoE is likely to only cut rates once a quarter going forward,” she said, against a forecast for four consecutive 25bp cuts from the Fed from September to January.

Rates markets were steady with 10-year US treasury yields at 3.83%, two-year yields at 3.87% and the gap between the two at its narrowest in nearly three weeks.

Heavy selling in the New York evening drove bitcoin down 4% on the dollar to $59,450. Gold held at $2,517/oz.

Reuters