A look at the day ahead in European and global markets by Kevin Buckland
Two of this week’s most important events are almost upon us, as Wednesday ends a two-day long media void that saw markets drift without clear direction.
The headliner is surely the long-awaited earnings report and accompanying comments from AI darling Nvidia, which will undoubtedly determine whether the Nasdaq breaks the all-time highs it set this week – or will experience a sharp decline.
AI fever has propelled the Nasdaq to a gain of more than 12% this year, while the Philadelphia SE semiconductor index – or SOX – has risen 21.5%, leaving both a large margin of decline.
Nvidia’s options signal volatility ahead: They’re poised for an 8.7% move in either direction by Friday, which equates to $200 billion in market cap.
Next comes the rankings, at least from a global investor’s perspective, the minutes of the Federal Reserve’s latest policy meeting.
Although the meeting predates last week’s widely hailed bearish surprise in U.S. CPI, it will nonetheless be scrutinized for clues about the likely policy trajectory, especially as Fed officials have until now refused to be optimistic about the risks of inflation.
Governor Waller, Vice Chairman of Supervision Barr and no fewer than three regional Fed chiefs all urged continued patience overnight, strengthening the chorus that is building by the day. Chicago Fed boss Goolsbee will take the podium later today.
The dollar was content to drift slightly higher against its main rivals this week.
Sterling, however, showed particular resilience, marking 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 ease in the April figures, will likely tip the scales in favor of a rate cut in June, which is currently seen as a draw. spell.
Unlike the Fed, Bank of England policymakers are divided over the outlook, with Governor Bailey saying this month that future cuts may need to be larger than markets have priced in, only for the economist to Chief Pill declared the next day that betting too heavily on a June reduction would be a bad idea.
Deputy Governor Breeden is participating in a roundtable discussion today. Pill speaks Friday.
Main developments that could influence the markets on Wednesday:
-UK CPI, PPI, RPI (retail price) (all April)
-FOMC Minutes from April 30-May 1 meeting
-Nvidia profits (after market)
(By Kevin Buckland; editing by Christopher Cushing)
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