A look at the day ahead in U.S. and global markets from Mike Dolan
World markets, heady on hopes for renewed U.S. disinflation and another attempt by China at shoring up its ailing housing sector, entered the new week on the front foot as attention switched back to the artificial intelligence boom.
AI-bellwether Nvidia reports quarterly earnings on Wednesday with the bar to impress the investor gallery as high as ever – its stock has almost doubled again this year so far after tripling in 2023.
And that’s with good reason – the chipmaking giant’s revenue is expected to have more than trebled to $24.8 billion from $7.2 billion a year earlier, with earnings per share soaring to $5.57 from $1.09, according to LSEG data.
As a curious taster on Friday, Advanced Micro Devices gained more than 1% as Microsoft said it plans to offer its cloud computing customers a platform of AMD AI chips that will compete with components made by Nvidia.
Reddit, meantime, rose 10% following a partnership with OpenAI to bring its content to ChatGPT.
But it’s not been all about AI this year as still-buoyant U.S. growth and near double-digit aggregate annual earnings gains meet persistent optimism of lower interest rates later in the year.
Treasury yields backed up a touch on Friday after the week’s relief on April consumer inflation was dampened by irksome import prices and stubborn Federal Reserve soundings, not least from known-hawk Michelle Bowman.
But there’s still 40 basis points of easing priced into this year’s Fed futures strip and an 80% chance of a move by September. And the main Wall St stock indexes clocked their fourth straight week of gains, with the blue-chip Dow Jones Industrial Average closing above 40,000 for the first time.
On the rates front at least, the week’s 20-year Treasury bond auction, release of the latest Fed minutes and Thursday’s flash May business surveys from around the world stand out as weather vanes. With Fed Chair Jerome Powell isolated due to a COVID infection, Monday’s appearance of Vice Chair Philip Jefferson and governor Chris Waller may set the tone.
Otherwise, the week contains a smorgasbord of mostly second-tier economic data.
Overseas, Chinese markets gave a tepid cheer to Friday’s government measures to support the ailing property sector – with both mainland and Hong Kong benchmarks up less than half a percent on Monday.
And shares of Chinese developers wobbled a bit as investors fretted that what were billed as “historic” steps to stabilise the housing sector fell short. Hong Kong’s Mainland Properties Index closed down 0.7% giving back a little of this month’s 18% jump in advance of the inventory-clearing supports.
What’s more, last week’s numbers on still-plummeting house prices were compounded on Monday by news of an extended 10% decline in government land sales revenue for the January-April period.
In Japan, benchmark government bond yields inched to the highest in more than a decade on Monday, continuing a gradual grind higher amid expectations of tighter domestic monetary policy this year and Monday’s stronger than expected auction of inflation-linked 10-year JGBs.
The yen was steady, however, with the dollar little changed more broadly.
Gold did head to new records, however, with markets monitoring Iran’s political situation after its President Ebrahim Raisi – a hardliner seen as a potential successor to Supreme Leader Ayatollah Ali Khamenei – was killed in a helicopter crash.
Oil prices, however, were little changed.
Key diary items that may provide direction to U.S. markets later on Monday:
* US corporate earnings: Palo Alto Networks, Nordson, Keysight Technologies
* Federal Reserve Vice Chair Philip Jefferson, Fed Vice Chair for Supervision Michael Barr, Fed Board Governor Christopher Waller, Atlanta Fed President Raphael Bostic all speak
* US Treasury auctions 3-, 6-month bills
(By Mike Dolan; Editing by Toby Chopra)
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