Nvidia Earnings, CPI Data, and Jobs Reports Impact Market Outlook

Where We Stand – Market action remains subdued this morning after yesterday’s quiet US session acted as a rather uninspiring handover to Asian trade. Some modest softness has been seen in the Chinese and HK equity space, though the moves are little to write home about in the grand scheme of things, with other regional bourses doing little more than tread water.

News- and data-flow has also been light throughout the session, with Australia’s July CPI print the only notable release. CPI rose a marginally hotter than expected 3.5% YoY in July, a surprising print given the goods-heavy composition of the monthly inflation basket this early in the quarter, though admittedly a still notable 0.3pp fall from the 3.8% YoY rate chalked up in June. Nevertheless, the release will give the RBA little ammunition to veer away from their present ‘higher for longer’ stance which, if maintained, should continue to underpin the AUD vs. most G10 peers, so long as risk appetite continues to hold up.

Naturally, NVDA earnings after the close hold the key to the near-term direction for global equities, and risk appetite, coming at a time when risks around the AI theme appear to become more equally-balanced and, of course, with the S&P just inches away from a fresh record high. Derivatives price a punchy +/- 9.7% swing in NVDA stock in the 24 hours following the quarterly report, equivalent to a staggering $280bln worth of market cap in either direction. As has been the case for the entirety of earnings season, strong guidance will need to accompany revenue and EPS beats in order to unlock significant after-market gains.

NVDA aside, the medium-term path of least resistance continues to lead higher for global equities, likely with the US outperforming, after Fed Chair Powell strengthened the ‘Fed Put’ on Friday, as economic growth remains strong (7 of the last 8 quarters >2% annl. QoQ GDP growth), and earnings growth also remains resilient (blended Q2 24 growth of 10.9% is the highest since Q4 21).

Away from the equity space, calmer tones look set to prevail for now, as the FX and FI markets settle into something of a holding pattern, having successfully navigated the Jackson Hole Symposium, and now waiting for the August US jobs report on 6^th September as the next significant catalyst. Friday’s eurozone CPI and US PCE prints, however, could cause some knee-jerk intraday volatility, with the former of particular interest amid signs of rather stubborn price pressures within the bloc. Given the current dire growth outlook, it shan’t take much for folk to be shouting ‘stagflation’ from the rooftops once more, and the EUR looks incredibly overvalued at current levels.

Look Ahead – Today’s docket is remarkable if only for how empty it is. Besides aforementioned earnings from NVDA, there is little of significance on the calendar for the day ahead. Supply is due from the US, with $70bln of 5s set to be auctioned, though the market did digest yesterday’s 2-year auction rather well, stopping through by a healthy 0.6bp, compared to the prior 6-auction average of an 0.2bp stop-through. Besides supply from the US, and UK this morning, there is little else of note, besides scheduled remarks from BoE hawk Mann, and FOMC voter Bostic, as the afternoon progresses.