Nvidia watch party over, back to inflation watch

A look at the coming days in the European and global markets by Stella Qiu

Asia is in the red as AI darling Nvidia failed to meet the expectations of investors who were dissatisfied with the company's earnings, revenue and outlook, and simply outperformed Wall Street.

Nvidia shares have risen more than 150 percent this year thanks to insatiable demand for generative artificial intelligence (AI), so the 7 percent after-hours drop in shares could prove to be just another minor dip in shares of the world's second-most valuable company.

However, given the high valuations, it is probably time to be a little more cautious. Taiwan-listed shares of chipmaker TSMC slipped 2%, Nasdaq futures fell 0.7% and in Europe a lower open is expected, with EUROSTOXX 50 futures down 0.2%.

Later in the day, Germany and Spain will publish their preliminary inflation figures for August. In addition, some representatives of the European Central Bank will take part in some panel discussions.

Headline inflation is expected to ease to 2.3% in Germany and 2.5% in Spain. Any negative surprises will impact the eurozone inflation rate due on Friday and reinforce the outlook for further ECB monetary easing for the rest of the year.

According to the swaps, a rate cut in September is a done deal. However, they are less certain about action in October and December. They are pricing in an easing of only about 60 basis points by the end of the year.

The often volatile US jobless claims report, due later in the day, also gained importance after Federal Reserve Chairman Jerome Powell said policymakers do not want the labour market to weaken further.

Elsewhere, currency markets remained broadly stable in the Asian session, with the kiwi dollar up 0.6% to a new 2024 high of $0.6281 after a local survey showed a huge turnaround in business activity, fueled by a rate cut from the Reserve Bank of New Zealand.

U.S. Treasury yields also remained calm, although the inverse curve between two- and 10-year maturities was a hair's breadth away from turning positive. That would be the first time since July 2022, apart from the brief move backwards during the Japanese stock market crash earlier this month.

The yield on two-year bonds was 3.8671%, just 3 basis points higher than the yield on 10-year bonds.

Key developments that could impact markets on Thursday:

– preliminary consumer price index for Spain and Germany for August

– Weekly unemployment reports in the USA

– Panel participation by ECB Chief Economist Philip R. Lane

– ECB Vice-Presidents Aino Bunge and Olli Rehn will take part in panel discussions

– Final US GDP for the 2nd quarter

(Edited by Muralikumar Anantharaman)