A day-ahead look at European and global markets from Kevin Buckland
Two of this week’s biggest events are almost upon us, with Wednesday ending the prolonged two-day news vacuum that sent markets fluctuating without clear direction.
The main attraction is certainly the long-awaited earnings report and accompanying commentary from AI darling Nvidia, which will undoubtedly determine whether the Nasdaq surpasses the all-time highs it set this week – or hits a sharp pullback.
The AI craze has propelled the Nasdaq to a gain of more than 12% this year, while the Philadelphia SE Semiconductor Index – or SOX – is up a whopping 21.5%, giving both plenty of room to fall.
Nvidia’s options signal future volatility: They are poised for an 8.7% swing in either direction by Friday, equivalent to $200 billion in market value.
Next in the rankings, at least from a global investor’s perspective, are the minutes of the Federal Reserve’s most recent monetary policy meeting.
While the meeting comes before last week’s widely welcomed negative US CPI surprise, it will still be scrutinized carefully for clues about the likely policy trajectory, especially as Fed officials have so far refused to become optimistic about inflation risks.
Governor Waller, Vice Chairman Barr and no fewer than three regional Fed chiefs appealed for continued patience overnight, adding to a chorus that has been growing larger by the day. Chicago Fed chief Goolsbee takes the podium later today.
The dollar has been content to swing sideways for a slight rise against its main rivals this week.
Sterling, however, showed particular resilience, hitting a two-month high on Tuesday. The currency will be tested today by UK CPI data, the biggest local event.
The extent to which price pressures ease, or refuse to do so, in the April numbers could tip the odds for a rate cut in June, which is currently seen as a coin toss.
Unlike the Fed, policymakers at the Bank of England are divided on the outlook, with Governor Bailey saying this month that future cuts may have to be higher than prices set by markets, only for chief economist Pill to say in next day that too heavy betting on a June cut would be a bad idea.
Lieutenant Governor Breeden participates in a panel discussion today. Pill speaks on Friday.
Key developments that could influence markets on Wednesday:
-UK CPI, PPI, RPI (retail prices) (all April)
-FOMC Minutes of April 30-May 1 Meeting
-Nvidia earnings (after market close)
(Reporting by Kevin Buckland; Editing by Christopher Cushing)
