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A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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The early focus was on Nvidia, which in AI tech terms is the only company selling shovels during a gold rush. Its Q3 earnings handily beat the Street, as did its forecasts for Q4, although the bullish expectations built into this stock are so immense its shares still eased a touch.

The company conceded that sales to China would be significantly reduced by Washington’s restrictions on tech transfers, but balanced that by saying the drop would be more than offset by strong growth in other regions.

The logo of NVIDIA as seen at its corporate headquarters in Santa Clara, California, in May of 2022. Courtesy NVIDIA/Handout via REUTERS/File Photo

This caused some wild swings in after-hours trading, its stock sinking under $475.00 at one stage – quite a move given that each dollar is worth $2.5 billion in market cap for the $1.2 trillion company.

Volumes were so large and orders so backlogged that the price was – unusually – still moving erratically hours into the Asian day. The stock was last indicated at $490.75, down 1.7% from the official close of $499.44.

The other big tech news was Binance chief Changpeng Zhao pleading guilty to breaking U.S. anti-money laundering laws as part of a whopping $4.3 billion settlement. Zhao stepped down and will pay a $50 million fine, but could also face a prison term.

Back in the old world, minutes of the Fed’s last meeting didn’t really shift the dial on the policy outlook, at least for markets. The FOMC is clearly on hold and it would take an inflation shock to get them to consider another hike. Equally, “all participants” agreed policy would have to stay tight for some time to come.

Graphics are produced by Reuters.

There was a lot of talk about the September-October rout in the bond market having tightened financial conditions, but since that meeting 10-year yields have dropped more than 50 basis points. That would normally add to the case for staying high for longer.

But the market apparently doesn’t see it exactly that way, with a March rate cut priced at a 29% probability and a May easing at 60%. Futures still imply around 93 bps of cuts for 2024.

Treasury 10-year yields were up 1 basis point at 4.41% , but not far from the recent low of 4.397%. Major currencies were also little changed, although China’s central bank did set another firm fix for its yuan, suggesting it is serious this time about stopping the decline.

Later on Wednesday, Sweden’s central bank will meet in what is expected to be a very close call on whether to hike again. A Reuters poll showed 10 of 19 economists looked for a rise, while market pricing is leaning against a move. A steady decision would likely be taken as the end of the cycle and put the crown under pressure, which argues for a hike today.

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